Foreword
"Market Thoughts" is an examination of recent financial-market developments to help assess what might be ahead.
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Summary
A purposely short "Last Week..." this time around, pending the next, more comprehensive edition I am planning for early next week. However, there are a few items that are possibly timely at the moment, and I do want to comment on them.
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* Stocks: The stock market -- again -- is in critical territory. It has had a few of these pressure points during 2005, none of which has it passed with particularly flying colors.
* The overwhelming consensus is that this year, like last, will see a major rally that, on balance, lasts off the most recent lows through year-end. But history teaches that when so many people are so very comfortable holding the same view, it often doesn't work out.
* The following table breaks out where my seven-measure tracking group stood as of last Friday, vis a vis some key measuring points.
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SELECTED STOCK-MARKET MEASURES
(GRA Seven-Measure "Tracking
Group," Listed by YTD Returns)
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11/04 3/2005 12/31 Week From
2005 High 2004 Ended March
Close Close* Close 11/04 High YTD
===== ====== ===== ===== ===== =====
NYSE Comp. 7508 7441 7250 +1.9% +0.9% +3.6%
Wilsh. 5000 12220 12074 11971 +2.3% +1.2% +2.1%
Russ. 2000 658 645 652 +3.6% +2.0% +1.0%
S&P 500 1220 1225 1212 +1.8% -0.4% +0.7%
NASDAQ 100 1628 1545 1621 +4.6% +5.4% +0.4%
Value Line 401 403 404 +3.1% -0.5% -0.7%
DJIA 10531 10941 10783 +1.2% -3.7% -2.3%
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Average +2.6% +0.7% +0.7%
Median +2.3% +0.9% +0.7%
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*2005 closing highs as of March, as of dates shown:
NYSE Composite (3/4), Wilshire 5000 (3/7), S&P 500
(3/7), Value Line (3/7), Russell 2000 (3/4), DJIA
(3/4), NASDAQ 100 (3/7).
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* Although year-to-date returns have a fair skew between the best and the worst performers, the overall 0.7% average and median returns would not be a great year. It certainly would constitute a disappointment relative to what expectations were as this year was beginning. But these numbers aren't much different than what was in place a year ago, which is helping to fuel expectations ("wishful thinking"?) that this year will end like last year did.
* Call me stubborn, but I continue to think the March 2005 highs were important, which is why they remain in the above calculations.
* Not shown in the above table are returns from the respective September highs, the latter now constituting levels I think have become increasingly important. As of last Friday, the tracking group stood, on average, 1.9% below the September highs. Only the NASDAQ 100 finished last week higher than its.
* So, are we in the midst of what the consensus believes we are in, or will this turn out to be yet another failed attempt at a definitive breakout? I suspect the next several trading days will be critical in answering the question. For bulls, though, the market's current area would not be at all a good place from which to turn down.
* Bonds: It's been a while since people were roughed up by the bond market's behavior, but the last few weeks have done just that. For total-return investors, the longer end of the Treasury curve has not been a good place to be. I'll discuss this in more detail soon.
* One more comment on the Treasury market now, though, which is a caution against feeling too good about this week's firmness in prices. This is not an uncommon phenomenon during the week of quarterly refundings, which is what this is.
From the "not much more than a hunch" front:
The Dollar: I continue to think the general area of 90-92 is likely to contain the current rally and at some point, could become an area from which a major downturn in the greenback commences.
Crude Oil: I sense that the $55 to $60 range will contain the current correction.
Physical Gold: Some people are opining that gold has made (past tense) an important top. I don't agree, though, and believe there is likely to be another good move to the upside before year-end. If it occurs, that move could become critical in assessing bullion's fortunes for the several months coming thereafter, but I think it is too early to tell right now.
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