October 15, 2005 -- Winner of the "chutzpah" award for sheer gall is ta ta -- Treasury Secretary John Snow. This from yesterday's New York Times: "Treasury Secretary John W. Snow, touring a village in the Sichuan province, urged China to take a lesson from the United States on how to spend more, borrow more, and save less.He argued that China's consumers and entrepreneurs are badly in need of financial sophistication offered by American banks and investment banks." Russell Comment -- And yes, the scary part is that Snow was serious. ....................................................................................................................................................
As usual, there's a plus and a minus in the stock market picture. The plus is that the Dow on last week's decline broke well below its August 26 low, as you can see on the chart below. But as you can see on the second chart, the D-J Transports did not confirm -- the Transports held 8 points above their own August 26 low. This sets the stage for a decent rally spurred by a non-confirmation on the part of the Transports.
Note the Transports holding above their August 26 lows.
The negative in the picture is the severe decline in the Utilities. The Utility Average often leads, but even if it doesn't lead, it can give hints as to what lies ahead. The decline since the Utilities' October 3 peak has been so drastic that I don't think any near-term rally will be able to take the Utility Average to new highs. In other words, I believe the Utilities will lag on any rally -- and this would be a negative in the picture.
Finally, I expected more bearishness than we've seen so far before an important rally could materialize. That, of course, is just a subjective judgment and I could be very wrong, but those are my thoughts.
Much of Friday's optimism now seems to have been based on the belief that oil has topped out and is heading lower. I'm not convinced of this, and the chart shows you why I'm not convinced. First, after surging to 70 on August 30, oil has been correcting. Yet oil is still above the 60 dollar level.
I'm watching MACD at the lower part of the chart. The blue histograms are starting to contract towards zero, and this could mean that the worst has been seen for oil, at least for the time being. Oil has also held well above its 200-day moving average, which now stands at 56.21.
I've run a 15-day rate-of-change (momentum) study at the bottom of the chart. The rate-of-change (second red arrow) may have bottomed, and if so this would be an important plus for oil. Finally, I would say that the longer oil holds above 60, the better the bullish picture for oil becomes.
That's the picture as I see it this weekend. -
And I'll see you Monday,
Russell ........................................................................................................................................................................ The following is from an article entitled, "American Debacle." It was taken from a piece written by Zhigniew Brzezinski, who was National Security Advisor to President Jimmy Carter. You may not like Carter, and you may not like Brzezinski, but these are thoughts worth pondering.
"It should be a source of special concern for thoughtful Americans that even nations known for their traditional affection for Americans have become openly critical of US policy. As a result, large swaths of the world -- including nations in East Asia, Europe and Latin America -- have been quietly exploring ways of shaping regional associations tied less to the notions of transpacific, or transatlantic or hemispheric cooperation with the United States. Geopolitical alienation from America could become a lasting and menacing reality.
"That trend would especially benefit America's historic ill-wishers and future rivals. Sitting on the sidelines and sneering at America's ineptitude are Russia and China -- Russia because it is delighted to see M u slim hostility diverted from itself and towards America, despite its own crimes in A fghanistan and Chechnya, and is eager to entice America into an anti-I slamic alliance: China because it patiently follows the advice of its ancient guru, Sun Tzu, who taught that the best way to win is to let your rival defeat himself.
"In a very real sense, during the last four years the Bush team has dangerously undercut America's seemingly secure perch on top of the global totem pole by transforming a manageable though serious challenge largely of regional origin into an international debacle."
Russell Comment -- I honestly believe the above is the correct view. In four years this administration has succeeded, with the exception of Britain, of turning the whole world against the US.
I receive e-mails from traveling subscribers almost every day. The constant comment is that "foreigners like the American people but dislike, fear or actually hate the US government." They see the US government as the world's bully, an arrogant and untrustworthy collection of war-mongers and loose cannons. Sad to say, that seems to be the story.
