Parallels between Dow and Japan Options

[Mommy]

These extremely short term observations mean nothing. Unfortunately posting this won't help my case, but we can just look back 6 months. The Dow closing below 8000, for the first time in since 2003, was on November 20, 2008. It wasn't until February 17th, 2009 for the Dow to close in the 7500 range again, and even lower later.



U.S. Foreclosure Filings Hit Record for Second Month
So when foreclosure filings break two consecutive records, that's an improvement? Next week we'll have housing sales on Monday and housing construction numbers on Tuesday. A slowing decline doesn't mean improvement.



The market has been eating dismal news for the past 8 weeks, yet the indexes are still holding onto significant gains. There was a lot of optimism, but now it is fading yet again.



Well when 1000+ stores close, business will be picked up from their competitors. The customers that used to shop at LNT and CC won't suddenly stop buying house wares and electronics. You’re also seeing the American consumer trading down for better value. Sales are down for JC Penny, Nordstrom, Abercrombie Fitch, Sears, Macy’s, mainly the mall stores.

So, your observation of what you have seen at a Fry’s store negates my comment about the consumer buying the essentials? My comment is based on net losses in the last fiscal year for these companies. Panasonic losing $4 billion(first loss in 7 years), Sony losing $1(first loss in 14 years), Hitachi losing $8.1 billion, NEC losing $3 billion, Toshiba losing $3.5 billion. So, if my comment is unfounded, why are they losing money when they had such great profits last year?

Consumers had about -6% saving rate for 8 years and now we’re seeing that rate at about 4.2% which was announced in March. That is a 10% swing, and considering how much of our GDP is dependent on consumer spending, I can’t see an improvement anytime soon.



In the past, these bear market rallies(or perhaps this is a cyclical bull) have see resistance between the 50-70 day range of trading. Today is day 49. I can't predict the future, but I believe that the bottom will be tested again, and that whatever this may be, is unsustainable.

I read sales were up for JCPenny's because they are the cheaper of the department stores.

[impala454]

These extremely short term observations mean nothing. Unfortunately posting this won't help my case, but we can just look back 6 months. The Dow closing below 8000, for the first time in since 2003, was on November 20, 2008. It wasn't until February 17th, 2009 for the Dow to close in the 7500 range again, and even lower later.

I agree with you that they mean nothing bud.

U.S. Foreclosure Filings Hit Record for Second Month
So when foreclosure filings break two consecutive records, that's an improvement? Next week we'll have housing sales on Monday and housing construction numbers on Tuesday. A slowing decline doesn't mean improvement.

How does a slowing decline not indicate improvement? Do you think it's just going to flip like a switch?

The market has been eating dismal news for the past 8 weeks, yet the indexes are still holding onto significant gains. There was a lot of optimism, but now it is fading yet again.

Say what? How is it fading? Yeah, dismal "news". Not dismal results.

Well when 1000+ stores close, business will be picked up from their competitors. The customers that used to shop at LNT and CC won't suddenly stop buying house wares and electronics. You're also seeing the American consumer trading down for better value. Sales are down for JC Penny, Nordstrom, Abercrombie Fitch, Sears, Macy's, mainly the mall stores.

Yeah, because malls are more expensive. It doesn't mean people are "only buying the necessities". And as far as BB & BBB's profits going up, whether it's due to CC & LNT's bankruptcy is irrelevant. If your claim that these companies went bankrupt because of lack of consumer spending is true, then these people wouldn't have immediately gone over to BB & BBB to shop.

So, your observation of what you have seen at a Fry's store negates my comment about the consumer buying the essentials? My comment is based on net losses in the last fiscal year for these companies. Panasonic losing $4 billion(first loss in 7 years), Sony losing $1(first loss in 14 years), Hitachi losing $8.1 billion, NEC losing $3 billion, Toshiba losing $3.5 billion. So, if my comment is unfounded, why are they losing money when they had such great profits last year?

I didn't say my comment negated your statement. Just that it's hard to believe when I observe no changes. As far as the companies you listed, they all do a lot more than sell consumer products. Plus, you do not buy consumer goods directly from any of them. If Best Buy's profits are up 30% over the past year, I don't see how you can make the case that people are shopping there less.

Consumers had about -6% saving rate for 8 years and now we're seeing that rate at about 4.2% which was announced in March. That is a 10% swing, and considering how much of our GDP is dependent on consumer spending, I can't see an improvement anytime soon.

People are saving money because the credit market went in the toilet... By sheer lack of credit they're unable to spend as much. They're also not putting as much into investments. IMHO this is a good thing.

In the past, these bear market rallies(or perhaps this is a cyclical bull) have see resistance between the 50-70 day range of trading. Today is day 49. I can't predict the future, but I believe that the bottom will be tested again, and that whatever this may be, is unsustainable.

So you believe it will drop under $6500 again? What do you mean by "whatever it may be, is unsustainable?"

[dauss]

So you believe it will drop under $6500 again? What do you mean by "whatever it may be, is unsustainable?"

I believe that it will go back under 6500 again.

Whatever this may be, refers to this 25%+ gain of the indexes. The gains we have seen is generally seen over 2-3 years of a good economy, for it to shoot up so high in less than 3 months is ridiculous. It is a bear market rally? Is it a cyclical bull in a bear market? We won't know for decades.

[impala454]

It's not a cyclical anything... these "gains" are not really gains they're just recovery. This recession was due to the credit meltdown, so it wasn't something that's on some cycle that you can go back and find a pattern for. Just like the Sept 11th recession.

[dauss]

It's not a cyclical anything... these "gains" are not really gains they're just recovery. This recession was due to the credit meltdown, so it wasn't something that's on some cycle that you can go back and find a pattern for. Just like the Sept 11th recession.

On September 29th, 2008: Dow fell 778 points, 17th worst percentage drop. Nasdaq had the worst percentage drop since the tech bubble burst in 2000. S&P500 had the 2nd worst percentage drop ever.

The last time the Dow staged a comparable drop was on Sept. 17, 2001, when it plunged 684(6.9%) points after the 9/11 attacks. It would ultimately bottom 10 months later, after dropping an incremental 15.5%.

Looking at the Nasdaq, it last staged a comparable plunge on April 14, 2000, as the Internet bubble finally burst. It would ultimately bottom 30 months later, after dropping an incremental 66%.

[impala454]

Your point being?

[chook]

Your point being?

the roller coaster may have more humps.

[impala454]

Well of course it will, but I don't see that any of what he mentioned in post #22 points towards us hitting another bottom any time soon.

[Mommy]

I think a lack of confidence might drive the Dow down.... especially with people like Dauss running around. If consumers would have confidence that the gains are here to stay, the growth will continue.

[impala454]

With the bankruptcy of Chrysler and most likely that GM will follow, will have serious repercussions throughout the entire economy.

Just had to throw this in there.. GM went bankrupt, DOW went up nearly 100 pts and closed at > 8500.

[dauss]

I believe that it will go back under 6500 again.

I can no longer stand by this statement. The DJIA composition changes rarely, but come June 8th, in less than 2 years it will have switched out 5 companies that comprise the index. With the removal of AIG last year and the removal of Citigroup coming up, the financial sector will be underweighted.