May 26, 2008 - Issue #112
How Far Down?
How far down? It appears now, that's the only question!
CNBC, in answer to last week's question (What's going on inside the Dow Transportation
Index?) had a guest expert give an excellent explanation.
The Transports, like the Industrials, are a 'price weighted' index. That means the higher
the price of a stock the more weight (influence) it has in the calculation of the index
If you compare the price of the 'rails' with the airlines and trucks you can plainly
see that the airlines don't count for very much. The more the trucking companies get beat
up by rising fuel costs the less they count also.
The result? The index climbs like a home sick angel even as many of its stocks are
getting killed. You still believe the index is 'representative'? I call it misleading.
So, what are the Dow components telling us now? Lower. Much lower. Pretty scary. DOW 11,000 late July???
By the way, did you see the angry discourse between Congresswoman Waters, (Dem-Calif.) and
the President of Shell OIl at a congressional inquiry over the rising price of gas? He
said you 'liberals' won't let us drill for more oil and she said, "Next year, this
'liberal' will be wanting to take over your companies!" Is she advocating nationalization?
He should have shot back, "Yeah right! You and Venezuela's Chavez!"
Remember Hillary saying, "When I'm elected, I'm going to take those profits..."
(confiscation?). Is this their mind set? Shareholders (mutual funds, pension plans,
401k's, etc.) have nothing to say about that??? Who died and made them 'God'?
Add to that anticipation of higher taxes and you wonder why the market is pessimestic?
Dow score card for the week ending 5/23/08.
DJ-30: 12479.63 -507.17 -3.91%. The Real World (arithmetical) DJ-30: 51.09 -2.08 -3.91%.
UP: 2, Down: 28.
Trends (weekly charts): This is the subjective part.
Rising (Generally Higher Highs/Higher Lows) 1 (-10) 3%:
Consolidating (Generally Lower Highs/Higher Lows) 11 (-3) 37%:
-*AA, -*CAT, -*DIS, -*HPQ, -*IBM, -*INTC, KO, MRK, PG, -*T, XOM.
Declining (Generally Lower Highs/Lower Lows) 18 (+13) 60%:
AIG, -*AXP, -*BA, BAC, C, -*DD, GE, -*GM, -*HD, -*JNJ, _*JPM, -*MCD, -*MMM, -*MSFT, -*PFE,
-*UTX, -*VZ, -*WMT.
+/- denotes change of direction.
* denotes change of category.
Comments? Ideas? Feedback? Let me have it, right between the eyes! I'd love to hear from you. Just reply to this zine and tell me what you think!