Stock market history through the Presidents.

HISTORIC VICTORY! NOW WHAT?

Congratulations to President-elect Barack Obama on his historic win on November 4. He does
represent a watershed in American politics. But once the applause dies down, as inevitably it will, the real hard slog begins. He has inherited a mess.

So just what kind of mess?

• The worst financial crisis since the Great Depression, with bailout commitments that could add upwards of $2.2 trillion to the US debt.
• A fiscal budget debt that could hit $1 trillion in the coming year.
• Two unpopular wars that have cost the US taxpayer $860 billion and counting (source: CRS Report for Congress, October 15, 2008). Despite a desire to get out of Iraq it will probably prove to be difficult. Add to that cost the commitment to up the ante in Afghanistan and it will add billions to current costs.
• Deteriorating infrastructure, much of it old, leading to destruction by hurricanes or failures, as witnessed by the infamous collapse of the Minnesota Bridge and the New Orleans leaves, all needing to be repaired or replaced at a cost of upwards of $2 trillion.
• Healthcare, although probably the best in the world, currently costs over 17 per cent of GDP, the highest in the industrial world. But control of healthcare lies with insurance companies, and over 50 million Americans have no coverage.

S&P 500 STRATEGY: STAND ASIDE (for definitions of terms see end of report)

• Low made on October 10 has thus far held. We are now four weeks off of those lows.
• The low was made on October 10 at 840 and a successful retest was made on October 24 at 852.
• A brief strong Election Day rally was snuffed out with the two biggest down days ever recorded after the election.
• We closed up on Friday suggesting that the pull back was just that – a pullback.
• As long as we can stay above 875 we should be okay.
• November 7 was a natural square day and often a turn date.
• A negative is that the hedge funds year is around November 15 and we could still see selling into that date.
• We broke out over the 20 day MA but the Wednesday/Thursday fall brought us back under.
• Breaking out over 935/940 would be positive and above that level we should go up.
• Targets remain for this rally to 1050 to 1100 and possibly even to 1150.
• Friday’s rally came on the back of the very negative unemployment numbers.
• Speculators can be buyers on Monday if we continue back up.
• We remain confident that a significant low has been seen but cannot rule out a test later in December.
• Buy SPY or SPY Dec options.

TSX INDICES

Last week’s reversal week failed to see any follow through as the TSX Composite and most of the subindices closed down. Most of the down week was made in the two days following the US election when the market was pummelled. Friday’s mixed up day was hopeful that the coming week may see a resumption of the reversal up that started a week earlier.

Technically nothing has given us a buy signal and it is highly unlikely that anything will anytime soon although it is possible. Most indices remain well below their key 40 week MA and the 200 day MA. But that doesn’t mean one can’t buy. Where we would concentrate on any buys is the sectors that bucked the trend this past week and actually closed higher..[read more...]

Subscribe to David’s reports and read more about:

• The economic mess facing President Elect Barack Obama.
• Obama greeted with sharpest two day sell off ever following an election.
• Stock market history through the Presidents.
• A market in endless liquidation this will not be.
• No 1930’s style Great Depression. Instead a series of rolling bull and bear markets.
• Looking at previous financial panics.
• The positives for Obama.
• Lurking in the background huge monetary stimulus.
• Monetary stimulus leads to bubbles.
• What will be the next Bubble? Will of course we believe Gold!

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