Barron’s Online has a segment called “The Trader”. From the October 17th comes the following quotes:
“First, the inflation theme has gotten loud, almost as loud as the stern warnings by Federal Reserve officials that they will keep raising short-term rates to fight it. The concerns about high fuel prices and a hard-up consumer are a secret to no one by now. No one knows when the stock market will have fully accounted for a hawkish Fed and a dampened consumer-spending outlook, but it’s arguably closer now than it was a month ago. Minor clues: Stocks rallied Friday after the steep headline consumer inflation number (but moderate “core” number) and a decent retail-sales figure. Internal market dynamics have been lousy — many more stocks falling than rising, many more breakdowns than breakouts. At some point, short-term extremes are reached, and several measures of oversold conditions (such as the percentage of stocks below their short-term averages) suggest, at minimum, a lazy bounce in prices soon.”
The article continues:
“So, is it a similarly good time to buy into the contagion concerns? It’s hard to say, but what’s notable is that the brokerage names are not nearly as beaten-up as they were then. Both Goldman and the overall broker-dealer index were then off 16% from their highs. Now they’re only 6% off. Then, earnings fears were rife; today there’s much more confidence in the brokers’ numbers. In the neglected corners of the financial sector, though, there may be riper fruit, at least for a taste of short-term upside — especially if the broad market delivers a minor bounce.”
The article continues:
“All this alone doesn’t mean telecom will soon be seen as a font of riches by investors. But it does, perhaps, offer a chance to play for some reversion to a more typical historical relationship between these groups. As recently as April a recommendation to own telecoms while betting against utilities was made here. And it was proven just plain wrong, or horrendously early. But the divergences are even more dramatic now.”
I just don’t get the point of all of this. How is it useful other than as a historical reading of market activity for the past week? And how is that useful except as entertainment?