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January 9, 2008
Few people are paying attention to the ripple effects of the housing market in other industries. Thus many other sectors in the market are also being punished. There is more and more pressure on the Fed to cut interest rates further and I believe, that once again, they are behind the curve. When the free market values the 2-year Treasury note at 3%, how can the Fed hold rates at 4.25%? But...what do I know?
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THE GREAT CHARLES DOW WOULD NOT LIKE THIS MARKET
Charles Dow wouldn't like the stock market right now...
More than 100 years ago, Dow, the cofounder of Dow Jones and The Wall Street Journal, laid down the foundation of modern technical analysis... the art of using charts to help make investment decisions.
One of Dow's major tenets holds that the stock market is healthy when both the manufacturers of goods and the transporters of goods are doing brisk business and enjoying rising stock prices. Dow called it a "confirmation" when both his Industrial Average and Transportation Average reached new highs together.
While the Dow Industrial's troubles are front-page news, you rarely hear about the sorry state of America's shippers, truckers, and railroads. As you can see from today's chart of the Dow Transportation Average, those who ship goods are living the domino effect of lower home prices, less disposable spending money, and lower freight demand. Take a big position in stocks right now? Mr. Dow would say "No thanks."
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