Stock Market Choke Points

Part A

by Brian Stoll, TimingStrategies.com |January 9, 2009

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Greetings and the best to all in health, family and finances for 2009 the year of the Ox in Chinese calendar terms I believe? What relevance this may mean in financial terms if any, I haven’t a clue! With all that has transpired from 2008, I would term 2008 as the year of initial shock and dismay. It is therefore my belief that 2009 will be a year of realization of reality and consequences, eventually culminating in rage. I mean that within the context being that the American investor class will begin to realize that a significant portion (not all) of the previous 20 years of asset appreciation have been built upon an era of Alan Greenspan’s Ponzi finance of decreasing interest rates for the purpose of increased credit and leverage. Robert Rubin’s and Hank Paulson’s malignant legacies will serve as the Black Hole in financial history of what happens when the government of, by and for the people allow the robber barrons of wall street to “manage things”. It’s pretty much like putting child molesters in charge of an orphanage with zero accountability.

I’ve pondered thoughtfully and repeatedly as to the several potential and most likely near term technical scenarios of price action for the stock, bond and resource markets for 2009 and my estimations keep coming back to the fundamental conclusions of a bigger picture. The bigger picture regarding the stock market in my estimation is that the baby boomer investor class on the cusp of retirement and fed up with Wall Street / DC’s perpetual lies and fraud will be looking to “get out” of equities as close to “break even” as they think they can. (Be that the wrong or right decision and into what, remains to be seen) We as an investor society are exiting the Richard Nixon a la George Bush era and are now entering the Jimmy Carter stage.

For the quick answer to what that means in terms of price, in the most ambitious of numbers 1150-1170 on the S&P. This is by no means a prediction of such price print to occur in 2009, what it is to say is that if and a very big if such price were to occur in any time over the next 18 months, it would be in my interpretation as what I have referred to in other client updates throughout 2008 as another “Gift”! A gift that implies if you can sell equities, consider it a gift to either get out of longs if you might still be trapped holding and for those inclined to exploit bear markets, sell short! A price tag of 1150-1170 portends in the near term the most ambitious ultimate price levels in my estimation at this time, whereas 980-1060 are a more probable level that may likely be achieved and price rejected significantly from there. The stock market in my estimation will demonstrate a counter cyclical uptrend in the contexts of a macro downtrend over the course of 2009. If price with regards to the S&P can be sold down first to the area of 840-780 into January or early in 2009 before getting “put up” much higher than the 930-950 area, then the probabilities increase for the higher price estimation of 1150-1170 later in the year or possibly even into 2010.

Ultimately I am of the estimation that the S&P will print 550-450 as a generational low but that as is as anything, only an opinion or pet theory which has no place in day to day account management. Making predictions is not what I do, I manage client investments and it is pure non-sense when I hear alleged professionals get on public media and blather garbage something like “We invest for the long term” or “Our price targets are looking 3-5 years out into the future” I just can’t help but say to myself these clowns make my job so much easier, thank you. Tell me what price is going to do over the next 3-5 days before you predict the next 3-5 years.

Now then, considering bonds and interest rates, it seems that everyone and their monkey feels compelled to sound the alarm about the next “bubble”! Never mind that these are pretty much the same stock market promoters that constantly advocated buy and hold stocks for the long run about 12 months ago with the S&P then at 1500 and the like. It is my estimation that bonds and interest rates have pretty much run 95% or more of their upside price potential or low in yields for a generation. That said, I do not believe that we are going to see a collapse similar to tech stocks, subprime or energy prices that every one seems to think is the next obvious outcome.

Instead it is currently my estimation that we will see interest rates and bond prices maintain an approximate 12-17% range for some time to come, at least for the next 6 months and out as far as 2 years. This is in conjuncture and context of the cyclical bear market in stocks we are currently still in.

Historically many if not most cross market relationships i.e. Energy, Precious and Industrial Metals, Agriculture, Currency, Interest Rates, Stock Indices etc: moved in non-correlated or direct inverse correlated fashion. Many of those relationships have been blown-up over the last 3-6 months and the impact going forward in my estimation will re-emerge different from their previous historical norm. How this plays out in Energy , Precious and Industrial Metals going forward I will cover in my next client update.

This is a client communication MOC report. It is not intended for investment advice and is not a recommendation to buy, sell or take any investment action whatsoever. Take all information you read here with a healthy grain of salt, as you should all financial information. If you have any questions or would like to receive a copy of our future client MOC reports, please feel free to contact us thru our web site at TimingStrategies.com.

Here’s wishing everyone the best of health, family and finances once again in 2009!

 

© 2009 Brian Stoll
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Brian Stoll | TimingStrategies.com | Registered Investment Advisor
Newport, California | Email  |  Website

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