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POLITICAL NASDAQ - January 28-February 3, 2005 |
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Written by Dagny D'Anconia
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Friday, 04 February 2005 |
In the interest of brevity, the Trend Indicator will be referred to as the DDI (Dagny Direction Indicator).
Last Friday Dr. Rice was sworn in a second time, and she took the helm of the State Department. The Nasdaq promptly took a swoon downward. However, this swoon only lasted one trading day as the Iraqi election was finally at hand.
Whenever great and historic things happen for America, good-hearted patriotic investors tend to jump in, buy stocks, and raise the market. The election in Iraq was no exception. Following the historic and moving election in Iraq over the weekend, there was a rise in the Nasdaq. However, the DDI did not change: It remained down. As the week went on, the strong patriotic influx did not continue.
The longer term Leftist market movers are there for the long haul. Long after the patriots have infused capital and gone back to minding their day-to-day business, the Leftists are there exerting their market forces. Thus when a patriotic influx of capital occurs, it is often quickly reversed by the Leftists. Those good guys that put money into the market immediately after the Iraqi election have probably already seen their capital diminish.
There was a similar overnight jump when Saddam Hussein was captured. That rise was quickly erased by a longer drop. A similar effect happened more broadly after the Bush reelection. Much of the rise after the election was reversed after the holiday season was over, and the market-moving Leftists got back to business. The Nasdaq is now virtually back to where it was at the time of the election, so people who bought in after the election have, on the whole, lost money. It is unfortunate, and is one of the reasons why I am writing this column for the subscribers of To The Point. I would rather we patriots be at the profitable end of our trades against the market-moving Leftists.
The Nasdaq did not drop immediately after the patriotic influx. It went sideways until the Fed and the State of the Union message. Perhaps you recall the so-called "Savage" effect. It is a cognitive illusion which causes people to delay inevitable actions until all data (even irrelevant data) are in. The Leftist market movers waited until the Fed decision on Wednesday to act on the DDI. The trading was very thin and the Nasdaq went sideways, until the Fed decision and the State of the Union speech. It then resumed its downward track. The State of the Union message was so powerful, so well delivered, and so well conceived, that it surely helped throw the Leftist market movers further into a down mood.
Because of the patriotic influx of capital immediately following the Iraqi election, the QQQQ ended the week virtually where it started. The rise in the market from the Iraqi election was virtually removed by the drop Friday as Dr. Rice got to work in the State Department, and the drop which occurred after the State of the Union. My position lost a very small 0.15%. The chaos was a moderate 6, and this was primarily associated with the immediate aftermath of the Iraqi election.
Bottom Line: We are up 6.58% at the end of 5 weeks.
Reminder: Past performance is not a guarantee of future performance. I will deliver the DDI as diligently as I can, but there may be factors beyond my control. It is up to you to decide for yourself how useful the Trend Indicator is for your purposes. If you would like to be email notified of Trend Indicator changes, send your email address to
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. For the time being it is made available to you as a fringe benefit of subscription to To The Point. I hope you enjoy it.
Dagny
Here’s the QQQQ Chart for the week:
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