Friday, December 5, 2008

Dow Jones bottom in? Cramer seems to think so....

I've quoted and tended to agree with Jim Cramer from MadMoney (CNBC show) for quite some time now re: this market downturn.

I have to disagree with him though re: this downturn being done. Until I see the S&P 500 not get pummelled by the pending convergence of the moving averages in the weekly charts (bottom chart) I won't buy into it. We should have a pretty good idea re: support for the S&P 500 by the end of December when the 10 day moving average and the price levels get close to each other.

The daily charts seem to indicate that support is being formed and that we are establishing a base of support. I would tend to agree with Cramer re: market redemptions potentially being at a peak now but I am NOT sold re: future profit taking occurring. I think people are investing ALOT less in the market today and have re-adjusted their allocations into equities. I don't think the upside is there anymore and I think A TON of leverage has been removed by the investment banks / banks that should limit the upside in the short-term. Just my 2 cents.

I could see the market going lower as unemployment soars, spending STOPS altogether and consumers TRY to re-build their balance sheets.

Here is recent news that I've read:

Today alone 20k job layoffs were announced. AT&T was 12k of the 20k alone.

Auto sales are off 30% + in November.....I don't see these numbers improving ANYTIME soon....If the government approves a bailout the U.S. auto companies will CHEW through that $25 to $34 billion so fast you will be STUNNED. With sales off 30% + they need to go into Chapter 11 and re-structure FAST. Cut factories, cut lines of cars that aren't selling, layoff workers, re-negotiate contracts, etc. Did you know that there is more health care costs in a GM car than steel costs? True fact I recall from my days as a research analyst....;_ylt=AmmzGDW65LZvc0aLKh.yF_OyBhIF
Abercrombie and Fitch's announced today that comp. store sales were down 28% year-over-year (Y-Y). Kohls was off 17%, JCPenney off 10%, Macys off 10%, etc. It is a bloodbath out there right now in retail land. Only DEEP discounts are getting customers to the counter. Profits will be HORENDOUS this year and I expect malls to start seeing vacancy rates RISE big time early next year as some retailers close down unprofitable locations or go belly up altogether. Oh, and I hate saying this but I expect alot of retail layoffs in early 2009. Retailers will get through the Christmas selling season and then trim, trim, trim.....

The ONLY company that was up in retail sales year-over-year was WALMART (up 8% from what I recall) as buyers looked for deep discounts at the stores. Heck, Target and Costco, who compete against Walmart and Sams Club, were both off nearly 10% in their comp. store sales.;_ylt=Aju4RfuKxJlz0bDSrQpMHgCs0NUE

Interesting view of Aeropostale in the video below. Abercrombie and Fitch isn't discounting this season and their comp. store sales were off 28% Y-Y!

Enough depressing news for now....

Dan Ross

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