Monday, November 12, 2007

Entry for Nov 12, 2007

It appears mainly from a sentimental standpoint that one has to be a bear in this environment. Though on a whole, it is my subjective interpretation, if the bulls today can main support above 1451, or even close above 1451, of the S&P 500, what we are seeing is a period of consolidation. Based of volume with the bollinger bands, it seems today that the price levels will break below support and search for stability around 1411. Overall I would say price support is necessary at 1400. If prices breach these levels within the week or into next week, I can not see bullish arguments holding up, unless we have surprise news of significant underlying strength of the fundamentals of the economy or we have more news of fed cuts, (which again, will only exacerbate the problem in the mid to longer term, although is necessary based on a liquidity standpoint). The mixed to neutral futures sentiment, will probably reflect a stale day of trading. This is most indicative of sudden volatile price swings, and in this environment, one can expect it more towards the downside.
Overall i feel that a stronger than perceived consumer is ever present only hurt by temporary high commodity and energy prices. As seasonality takes hold, and oil prices start to fall, this will alleviate pressures on the consumer. This will spur on holiday spending. Where will they get this money? One can argue the unwinding of a housing wealth affect, but i feel that a tight labor market since the summer offsets this. The mid to upper middle class have been resilient through this housing slump and has been maintain GDP levels. The current weakness in the technology is only perception. The announcment of the possible slow growth in CSCO was more of prediction and pre-emptive measure, and is not fundamental driven as the valuations of CSCO are still positive. But, does not neglect the fact that yes indeed credit problems will affect everyone, and should not have been a huge surprise in whole. In a sense, it is more postive that this happens, so that a bubble in tech does not form.
Possible inflationary pressures from the further weakening of the dollar, plus short term spikes in high energy and demand of an actual need for commodities will have short term slowed affects which we are feeling right now. At this point for the economy, it is vital to be moving inventory to avoid gluts so inflationary pressures do not come from the producer side. For you fundamentalist, being vigilant on cash flows especially in this tight credit environment is more important than ever...

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