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Being Street Smart 10/31/4


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#1 TTHQ Staff

TTHQ Staff

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Posted 31 October 2004 - 11:37 AM

BEING STREET SMART ____________________ Sy Harding AN INTERESTING WEEK LIES AHEAD! October 29, 2004. October ended with the market just about where it began the year, and still seemingly unsure of its direction going forward from here. The economic news this week wasn’t much help. On the positive side, home sales showed healthy increases. The American Petroleum Institute reported an unexpected increase of 4.4 million barrels in crude oil inventories. Crude oil prices, which had hit a new record high in the hour before the report was released, immediately began to decline and fell for three days in a row. Oil prices were not only helped by the rise in crude oil inventories, but also by news that the central bank of China raised interest rates in an effort to slow the pace of the surging Chinese economy. Slower economic growth in China would lessen that country’s demand for oil and take some of the pressure off the oil markets. The Chicago Purchasing Managers Index of business activity in the Chicago area, often a precursor of the national index, came in with a nice jump up to 68.5% from September’s reading of 61.3%. In the other direction, the Conference Board reported an unexpected large decline in its Consumer Confidence Index for October, its third monthly decline in a row. The weekly unemployment report showed an unexpected jump in the number of laid-off workers filing for unemployment claims, and the Help Wanted Index showed a decline in the number of available jobs being offered. The Commerce Department reported that Gross Domestic Product (GDP) grew 3.7% in the 3rd quarter. Washington and Wall Street economists had predicted economic growth of 4.3%, up from 3.3% in the 2nd quarter. The report provided grist for bulls and bears (as well as Democrats and Republicans). Bulls pointed to the improvement over the 2nd quarter. Bears pointed to the shortfall from forecasts. So much for guidance from economic reports. Meanwhile, the market has some interesting seasonal situations coming up which may finally break the deadlock between bulls and bears, if the huge shadow being cast by the election passes without overwhelming everything. The 3rd quarter earnings reporting period will be drawing to a close. That will remove some of the up and down volatility that dominated October when short-term traders were jumping in and out in response to each day’s accumulation of good or bad earnings reports. That will create a window of opportunity for the market to trade on other factors until the 4th quarter earnings warning period begins in a couple of months. The market will also be entering its usually favorable seasonal period based on the Wall Street maxim of ‘Buy in November and Sell in May’. Short-term, what I call the ‘monthly strength period’ was due to begin on Friday, and is due to run through next Thursday. It’s a period when extra chunks of new money flow into the market, frequently creating short-term rallies that can grow into something more in the market’s favorable seasonal periods. The extra chunks of money come from those investors who follow the strategy of dollar-cost-averaging into the market on a monthly basis, monthly contributions to employee 401K and retirement plans, investors who are paid monthly salaries, commissions or bonuses, etc. Overriding all other factors the Presidential election will slide into history. Just the release from the numbing campaign rhetoric, TV commercials, and bulk-mail advertising, should raise investors’ spirits some. That is, if there is a clear winner. Let’s not even go to the possibility of there being no clear winner with a repeat of the turmoil in 2000. We’ll simply hope that within a few days investors can move on to at least some degree of being able to mull facts rather than uncertainties. Sy Harding is president of Asset Management Research Corp., DeLand, FL, publisher of The Street Smart Report Online at www.streetsmartreport.com and author of 1999’s Riding The Bear – How To Prosper In the Coming Bear Market.