From InvestmentHouse.com
No doubt October was a bad month for the market as it inflicted the lion's share of the damage to this point in the bear market (going with an animal theme this weekend). There were a couple of positives to the month, however. First, the indices hit a new low for the year, a low deep enough to be considered the extent of a bear market selloff, and the indices reversed immediately off of that level. On that dive lower they held in the middle to top of the 2002 bear market bottoming patterns, a logical place for a subsequent bear market to find its bottom. Second, after bouncing up off of those levels the indices fell back again, but SP500 and DJ30 did not undercut that low, instead all indices reversed sharply this past Tuesday on strong volume. New lows held below the prior levels even as NASDAQ, SP600 and SP400 hit new lows for the year.
That shows the indices were pretty much sold out on this leg, not surprising given the 20+% declines in October, and the reversal on volume shows buyers stepping back in. The market is game for a move higher to work on a larger bottom and let stocks build some bases. It may or may not ultimately work, but this confluence of indications tell us there is a tradable rally that we have a good stake in already as we bought into the upside ahead of that big Tuesday surge and have already banked some nice gain on several positions. We even picked up some more positions Friday as DJ30 sets up for the next break higher.
Friday there was mixed news early yet again (seems we say that every day of late). Personal spending fell negative for the first time in almost 5 years (-0.3%) and a bit more than expected. The Bank of Japan lowered interest rates but less than hoped. Chicago manufacturing was terrible (37.8) and Michigan sentiment was weak (poor football performance perhaps). On the other hand, incomes gained again (+0.2%). Importantly, LIBOR once more continued its more rapid thaw: overnight 0.41% (0.73% prior); 1 month 2.58% (2.85% prior); 3 month 3.03% (3.19% prior).
