I was going to post this on my
blog, but alas, Blogger's down, and I wanted to catch this bit before it goes down the memory hole.
I have seen in recent months several brokerage houses touting "large caps coming back," but this last one from Marketwatch
wins the booby prize.
More fun below the fold...
From the above link:
CINCINNATI (MarketWatch) - When a strong technical backdrop meets with an ugly economic landscape, which wins?
The answer to that question - most likely, the strong technicals - could come in the fourth quarter.
Most would agree that on a fundamental basis, investors have several legitimate concerns. Near-record oil prices, a massive month-over-month decline in consumer confidence, and two major hurricanes have come together right when the markets are just a month away from what's seasonally their strongest period - November through April.
Yet with all these worries, the technical backdrop - the way the charts are taking shape - isn't as bearish as you might expect.
In fact, both the S&P 500 and the Nasdaq still hold just a stone's throw from four-year highs...
So what about market sentiment?
Here, the answer as measured by the Put/Call Ratio is once again surprisingly bullish.
Without getting overly technical, the Put/Call Ratio is a contrarian indicator that gauges market fear. More specifically, it measures the number of put options, or bets the market will go down, vs. the number of call options, which are bets the market will rise. The put volume divided by the call volume yields the Put/Call Ratio.
From the standpoint of interpretation, high readings are a sign of market fear, which is a bullish indicator. Conversely, low readings suggest complacency, increasing the risk of a market correction.
So in a nutshell, high Put/Call Ratio readings are bullish, while low readings bearish.
In late September, the Put/Call Ratio registered 1.41 matching its highest levels this year. In fact, the only other time this year the ratio exceeded 1.40 was in mid-April, or almost precisely when the markets touched their 2005 lows. (As a reference point, the ratio's 200-day moving average holds much lower, at 0.90)...
Take everything together, and the U.S. markets continue to hold tight to four-year highs, as they approach what's traditionally a seasonal sweet spot - November through April. That means until proven otherwise, the long-term uptrend for U.S. stocks remains intact, and this is still a market to buy on pullbacks to support.
(Emphasis mine.)
Ah, what a difference a day or two makes...
NEW YORK (AP) -- Stocks fell hard for a second day Wednesday, with the Dow Jones industrial average losing more than 120 points after a surprisingly weak reading on the service sector of the economy raised concerns about the continuing impact of higher energy prices.
Equities opened lower after Tuesday's selloff, then fell further when the Institute for Supply Management reported that its non-manufacturing business index, which measures the service sector, dropped to 53.3 in September from 65.0 in August. While any reading above 50 indicates the economy is expanding, the sharp drop in the index was unexpected, following a strong report in manufacturing earlier this month.
Wednesday's reading, which indicated supply managers were worried about higher energy costs, spooked investors already nervous about the effects that rising oil and gas prices will have going forward.
The market was still mulling Tuesday's comments from Dallas Federal Reserve Bank President Robert Fisher, who said inflation was nearing the high end of the Fed's comfort zone -- a clear signal that the Fed's short-term interest rate hikes would continue. The higher prices for energy have been filtering into the rest of the economy.
Investors are also jittery about earnings season, which officially starts Monday. Some companies such as Clorox Co. have already begun to warn their earnings will not meet expectations
None of this is surprising to regular readers of Kos; what with all the "Peak Oil" diaries etc.
But not to the analysts at Charles Schwab...
Schwab’s views in brief
Economy Continued expansion
Domestic stocks Overweight up to 5%
International stocks Overweight emerging markets up to 5%
Bonds Underweight 10% or less
Cash Neutral weight
As well as Prudential...
I think strong earnings will get Q4 off to a good start. Despite the attacks in London, two killer hurricanes, and steady Fed rate hikes, the equity market managed to rally in Q3. Our switch to overweight of consumer discretionary stocks was a bit premature, but these stocks have begun to rally. Tech and financial stocks have also begun to rally, and we reiterate the overweight rating of these sectors. Expecting a correction in energy prices, we continue to remain underweight in energy as well as low-beta sector consumer staples. With stocks looking cheap and earnings looking strong, I continue to recommend 100% equities for investors with a normal 60% or more equity holding. I still forecast a 2005 close of 1,340 for the S&P 500.
