Wall Street fecha semana sem rumo. Grandes tecnológicas pressionam

[Camisa Roxa]

WEDNESDAY a.m.
December 18, 2002



Consumers and other things
by David Nichols

First off, I've got to do a little ranting here to start off the morning.

If you read as much market commentary as I do, you get to see the themes that emerge from journalists and pundits. Now, at any given time, you are only a few web clicks away from seeing someone proclaim that "the consumer is running on fumes, and consumer spending is about to hit the wall."

I've seen this hundreds of times, and I'm sure you have as well. It's accepted bear market dogma.

Okay. Then please explain this chart to me, which comes courtesy of economist Ed Yardeni at Prudential using data from the Fed:



Personal savings -- that's right, savings, is now at a record high level compared to disposable personal income. And it's not because income is shrinking -- personal income continues to rise.

In aggregate, "Money of Zero Maturity" has now reached $6.3 trillion. In fact, this chart is looking a lot like the chart of the Nasdaq, pre-crash. As my colleague Adam Oliensis has pointed out repeatedly -- there is a bubble in liquidity.



So the real story is people are not hurting for cash. They are not drowning in debt. All this talk about the poor downtrodden consumer is a myth. The facts are available from the Federal Reserve, and the Bureau of Economic Affairs. And the fact is there is a ton of liquidity out there to stoke up the economy, should people get in the mood to spend, or move money into riskier assets like stocks.

I'm not saying that's going to happen anytime soon. Who can know? Bubbles can go farther and higher than anybody can predict. But it's time the actual facts start to get some airtime too.

Timing Models

One of the reasons I was really excited to bring the McClellan Market Report into 21st Century Alert is the highly accurate timing signals that Tom includes in each bi-monthly issue. I used to do similar calculations myself to project potential market turning points, until I realized that Tom did a better job of it.

So now I just check his timing signals every two weeks. I've learned over the past 5 years to really pay attention. What he does is look for clusters of timing signals from his various unique indicators -- he doesn't just look at price, but also signals from advance/decline oscillators, volume oscillators, and other charts. Whatever he's doing -- he doesn't divulge the method -- it's working.

Right now Tom's calling for a bottom between December 23rd and December 26th. He's got a strong cluster of signals marking a turning point around these dates.

If you're not yet a subscriber to 21st Century Alert, the McClellan Market Report is just one of 14 bonuses you get as part of a subscription. If you haven't seen the web site in a while, you should take a look. We've packed it full of the best analysts, traders, and forecasters we can find.

No Follow-through

Yesterday flopped. Instead of putting up another strong white candle, the markets instead did a slow drift back into the body of Monday's candle.



That puts a real wet blanket on the chances of a strong push higher here. As I belabored yesterday, the day after a big candle tells the real story. And the real story is that this market is not big on follow-through in either direction at the moment. Momentum is waning, and it's not likely that we'll see a big momentum push now, heading into expiration on Friday.

It's probably a good time to not over-think the market analysis, and over-interpret every little squiggle. Momentum and volume are drying up heading into the Holidays. Dare I say it -- but it might just be a good time to "tune out" the market a bit and lavish some attention on other things for a while. But only a little while.

Sentiment Dashboard
by Adam Oliensis



SENTIMENT TANK: The tank filled up 1% from 54 to 55% on Tuesday. The view of the tank above is zoomed in a little closer than we have been showing lately. Today we're not looking at the progression off the market's October low, but essentially at the recent relative stasis of the tank's level. Sentiment has been consolidating at about half full. The tank has been between 60% and 42% since mid-October and between 48% and 60% for all but three of those days.

The market has spent about half of the past year MORE fearful than it is currently, and about half of the last year LESS fearful. From this position there does not appear to be any particular pressure exerted on the market by sentiment alone.

SHORT-TERM GAUGE: The hourly gauge was pointing up Tuesday morning. However when the market couldn't follow through and the tank couldn't burn any fuel to speak of, the gauge rolled over and laid on its side (napping more-or-less in a fetal position). The SPX gave back about 0.8% on Tuesday after gaining about three times as much on Monday. This gauge is reflecting that consolidation.

MID-TERM GAUGE: The mid-term momentum gauge dropped down into the downtrend another three points from 65 to 62. This reading reflects the fact that there has been no confirmed reversal off the December 2 intraday market high. When Monday's gains found no follow-through on Tuesday the mid-term momentum continued on down. If we get upside confirmation of Monday's bullish candlestick then the mid-term gauge will very likely be turning up from here. If the market breaks below Friday's low then there's still plenty of room to the downside. There is enough room on the mid-term gauge for the SPX to head for the low 800s before driving the gauge down close to the 100 area.

All that said, our Confidence Diffusion Index (CDI) remained unchanged on Tuesday. That's a very neutral reading. CDI has a very slight leaning toward a reversal of the decline phase. Very slight. Hence the +1 Bullish CDI number.

LONG-TERM GAUGE: No change from Tuesday morning. The weekly advance off the Ocober low has been exhausted and the long-term gauge is waiting for the weekly candles to give it direction. As with the mid-term gauge there is a whiff of a bullish leaning in our +1 Bullish CDI figure.