The market was able to enjoy a day of positive gains with a bit of positive economic news. Factory orders rose .9% when the street was looking for was .8%. However, Warren Buffett stole the show with Berkshire Hathway’s purchase of Burlington Northern Sante Fe railroad. Transportation stocks helped boost stocks, but insitutional investors were mainly on the sidelines as volume fell more than 10% across the board. Stocks wrapped up the day pushing into the highs of the day closing the books on a positive note.
Witnessing volume lower is not a terrible situation today as many on Wall Street are waiting for the FOMC to release its rate decision along with their statement. If we are to rally from here today marked day two of an attempted rally and would need to see a follow-through day on days 4 thru 10. We have had follow-throughs come on days after 10 days, but these often signal an end to an extended uptrend. Often times the late follow-throughs are proned to failure. Ideally, we’d like to see at least 1 follow-through day from days 4-7 and for powerful moves two follow-throuh days from day 4 thru 10. Back in July of this year we did see two follow-through days and we had quite a few stocks breakout and move higher. The only issue was we did not witness explosive moves and not typical to uptrends we’ve witnessed in the past. If we do get a new uptrend it’ll be important we get a follow-through day to confirm.
A highlight today was when Warren Buffett was on CNBC being interviewed by the Squawk Box crew was very encouraging. I will normally have CNBC on the background as I drink coffee and review the market for the coming day. Very rarely does the mute button ever come off, but today it did as I saw Buffett being interviewed. What struck me was his emphasis on America having its best years ahead of her. His extremely positive attitude towards his view of America for years to come was quite inspirational to hear. At the moment, it is very difficult to understand how he can have this view with fiscal deficits soaring and Mardi Gras Monetary Policy. I do believe we’ll see a fundamental shift away from the current two party system where we swing back to the values laid out in the Constitution by our founders. Prosperity and liberty for all, but hearing Warren Buffett putting his money where is mouth is also nice to see.
Let’s not get too overwhelmed with joy and toast smores on an open fire. We still have an economy that is disjointed and a whole host of other issues including commercial mortgage backed loans. It isn’t if these will completely destroy America, but they are problems the market is equiped to take care of. Markets, when given the chance to work is the greatest most effective way to price assets. Over time, America will be able to solve its problems as we are a great nation.
Always keep those losses short and let your winners have the room to run.
