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December 08, 2008

Pivotal Events
by Bob Hoye

The following is part of Pivotal Events that was published for our subscribers Thursday, December 4, 2008

SIGNS OF THE TIMES:

Last Year:

"Luxury is Feeling No Pain"

"Pricey Wares of Burbury, LVMH, Hermes are Flying Off the Shelves"

- Wall Street Journal, October 17, 2007

"Ship Shortage Pushes Up Prices of Raw Materials"

- Wall street Journal, October 22, 2007

In that October the Baltic (BDI) was at 11039. After slumping to 5615 in January it rebounded to the record high of 11793 in June. Yesterday set new lows at 672, which is down 94%.

This Year:

"Metal Prices Fall Further Than During The Great Depression"

- Telegraph, December 2, 2008

"Salaried lawyers at top New York firms will get bonuses amounting to only a quarter of last year's."

- Bloomberg, November 26, 2008

Actually, there has been a night and day change in conventional wisdom since the confidence of last October-November. Today's shock and dismay is setting up the rebound rally that has been possible from the November low until around March-April.

* * * * *

Stock Markets: As we have been noting, sentiment has been devastated and dynamics have registered significant Downside Capitulation readings on our proprietary model. That is on the senior stock indexes as well as on commodities (CRB). Going the other way, there was a timely Upside Exhaustion reading on the Dollar Index. Not yet going the other way, we have yet to get the full Upside Exhaustion reading on the long bond.

The action since the November 20 low has been tentative, but seems to be recovering in price at the right time. The last high was DJIA 8831 last week and getting above this would break the overhead "ice". It could take well into January before the horrors of the crash are eclipsed by comfortably new recovery highs.

We have been describing the expected move out to spring as a tradable rally for investors and traders. It could carry most, if not all, sectors with it.

The attached study* updates the classic fall crash pattern. The fit has been remarkable.

(*Study may be found at www.institutionaladvisors.com)

Bob Hoye
Institutional Advisors

The opinions in this report are solely those of the author. The information herein was obtained from various sources; however we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each securitys price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance.

Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or options or futures contracts. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. In addition, investors in securities such as ADRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk.

Moreover, from time to time, members of the Institutional Advisors team may be long or short positions discussed in our publications.

Copyright © 2003-2009 Bob Hoye

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