Four Weeks Down, But Limited Damage

The index posted its fourth week of market losses, an event not seen since March 2009. However, this week’s damage was a minor -0.72% (Monday was up 1.43%, with Tuesday was up 1.30%) and the cumulative four weeks of damage was 6.88% (7.31% off the 1/19 high), compared to the 16.01% in March, and today ended with a field goal, as the market moved up slightly (0.29%) in afternoon trading. U.S. volatility (and damage) was much less than global, as concern over sovereign debt was added to the concern over the pace of growth.

With over 75% of the Q4 EPS in the bottom-line is good, relative to where we are in the recovery cycle, but non-financial sales still lag, and until they pick up, hiring won’t pick up. Dividend increases continued throughout the week, with more positive news expected next week. February is the busiest month for increases (fiscal over, annual being printed and share holder meeting coming up), but there are still issues that are straining to pay their dividend (didn’t make it in ‘08 or ’09), and we expect some negative news to start late in the quarter.

Its time to look at the long term whole picture, not just the trader’s notes. Look to the basic fundamentals – earnings, balance sheets, production and capacity, as well as balance sheets and business models. When these items come back in style and become relevant to investors, short-term tick by tick trading based on each news items or stat will diminish (but still exist, risk vs. reward), and investors will return to the market. Download file

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