Are We There Yet?

“Are we there yet?” “ No …”
The major indices ended up the week in a mixed note, with Nasdaq saving face of all three, having gained (gasp!) 28 points, or 1.2% to end up at 2311. The S&P 500 index lost 3 points (can we do better than this?), or 0.2% to end up at 1258. The big daddy of all, the might Dow Jones Industrial Average, has lost 126, or 1.1% to end up at 11,371. That’s it? Oh, yeah, the Dow dropped like a rock on Thursday, when the release of sales data for existing homes has sent it down, without a parachute, to plunge 283 points. Now that’s action!

“Are we there yet?” “No…”
Sounds like capitulation, right? Sounds like we’ve found a bottom … Ya’ think? Not according to Wachovia’s head of equity strategy, Stuart Freeman, who doesn’t see The Bottom just yet. For that, we may have to wait, but not long, if you ask me.

“What? You’re asking about oil? What about it?”
The crude has continued its slide from the height of $147, just three weeks ago, and fell 4.8% for the week, to $123 per barrel. Well, wasn’t that just few weeks ago, we were talking about oil supply (that’s shrinking) and demand increasing? I thought so too, but only this week, we will reverse the story. Barron’s pulls out some facts:
• Gasoline usage has fallen for 13 consecutive weeks
• Demand is down 2.2% YTD
• Even China (“What, China?” “Yes, I say”) shows a slowdown in the growth of energy demand
• Some people are looking for $80 per barrel in the medium term, like Steve Auth, CIO, Federated Investors cited by Barron’s.
• The supply side continues to do its part, and now drilling is booming around the world
• The US Geological Survey reported that the area north of the Arctic Circle contains about two-thirds the proved gas reserves of the Middle East.

“What now, Buster?”
Well, these mini breaks in oil’s uptrend and stocks downtrend may push the S&P 500 into a nice little rally of 5% within the next weeks.

“What else happened last week?”
• Oh, yes, the financials. What has become customary these days, we report banks’ losses without a blink, like it was yesterday’s news. Washington Mutual posted a $3.3 billion (with a “b”) quarterly loss. Gosh! Its shares got hammered amid concern that unsecured investors lost confidence in it. Can you say “financial distress” really slowly?
• Troubles in Motorland. Chrysler is cutting 1,000 salaried jobs, and gets out of the auto-leasing business, because it’s too expensive for consumers and the company… Hmmm, I did not see this one coming. Ford Motors posted a $8.7 billion (again, with a “b”) quarterly loss … no matter how you look at it – big “B”, small “b” – that’s one big number . (I wanted to say “one big a…s…s number” but then I have to put $1 in the jar, so I won’t say it). General Motors, not to be outdone, said that July sales will be “similar to June’s”… in other words they will be low again.
There may be some other news happened last week, but I think you got the picture by now.

Good news? What good news? Are you from another planet or something?