Out Fox The $treet

The Wall St Journal is reporting that the proposal to allow Tax Loss Carry Backs for 5 years is poised to be approved next week. It's been difficult to find information on this subject as we originally wrote about it on Wednesday [Tax Loss Proposal Gains Support] and hadn't seen any news about it until finding this article. The proposal is significant because it will provide immediate capital to a lot of struggling small cap stocks such as Liz Claiborne (LIZ) mentioned in the article. Basically any company losing money now would immediately be able to receive a portion of the taxes back that they've paid the last 5 years. The more they've lost the better. The article doesn't mention financials so we're still wondering what the impact will be on companies such as Regions Financial (RF) or Synovus Financial (SNV) that both received TARP money. If those companies were to get a refund, Congress might come under fire. If excluded, LIZ or Terex (TEX) would be our fa...

Contrary to our posts of the last few days, the market seems to be in the midst of a big correction finally. Or at least that's what the market and media tells us as the market closed today. Polls on CNBC showed that 60%+ plus investors expect a 10%+ correction and nearly 30% expect a 20%+ loss. Just another indication of how bearish the market has become. Down 6 of 7 days and 7 of 9, its surprising how few 'experts' have suggested buying this dip. One indicator that highlights the extreme negativity is the NYSE McClellan Index. At the close of today it ended at -114 or basically the same level as the end of February which is right before the market bottomed. The low number in the last year plus was just below -125 in October of last year. Those were some brutal moments in this market and indicative of how negative the market tone has become now. Its no clear cut indication that the market will turn tomorrow, but it does provide support to the theory that the market is sho...

According to some news reports yesterday, the U.S. Congress is gaining support for a Tax Loss Carryback proposal. We're not seeing a lot of news about this proposal but it seems to be something that would be very bullish for the worst off stocks in this economy. Any corporation that made a ton of money in 2004-2007 and is now losing truckloads of money would be able to reclaim some taxes paid in those previous years. It could be a huge boon to financials struggling to raise capital or manufactures that saw boom years and now are struggling to make ends meet in these lean times. It seems odd that Congress would inact such a law to help the hated banks, but then again a lot of the smaller banks could use some help to stay afloat and continue lending. On the flip side it would further help to support companies not allowing the best players to gain deserved market share. Some of the banks in strong capital shape might to see less growth potential with such a bill. Some of our favorite...

Ok this stat was actually from last week, but I'm just now reading it. The AIA (American Institute of Architects) reported last week that the Architecture Billings Index creep up to 43.1 in September still showing an industry in decline. Like other industrial sectors, the index is clearly off the lows, but this one is definitely struggling more to regain growth. The encouraging part of the index is that project inquiries grew to 59.1 showing signs that future demand will pick up. Its the highest level since September 2007 which is when the financial crisis really began. It'll be interesting to see how this index progresses in the next few months. The stimulus bill clearly didn't meet the needs of this country if ABI is still negative this many months later. If we could only learn from the Communist in China. Washington, D.C. – October 21, 2009 – As the nonresidential construction industry continues to struggle, the Architecture Billings Index (ABI) showed a nominal improve...

Great report from Ciovacco Capital Management . It shows that bull market rallies from corrections of 35% or more tend to last alot longer then most people think. In fact everybody clamoring for a market correction of 10% have been amazingly off based from the historical norms. Clearly a correction for corrections sake isn't how the market works. On average the market rallies 270 days or nearly 9 months after a major correction in the markets crosses back above the 200 MA. This means that the rally will last at least until early spring as the SP500 didn't cross back above the 200 MA until July 10th meaning the rally has really just begun. It's important everybody catches that part. Its not the market low of March 9th, but rather the point where the market became technically strong by crossing the 200 MA. Probably the most likely comparison was the 1942-43 rally that lasted a whopping 372 days. In a lot of ways this economy has been compared alot to the depression. Since w...

After the last week or so in the market and todays 1% drubbing, its difficult to remain overly bullish. Just about everybody claims the market is ready for a sizeable pullback and the drops in the SP500 in 5 of the last 7 days seems to bolster those thoughts. According to the recent report from Mark Hulbert, the evidence suggests that the market remains too bearish for a big correction. Hulbert has long been a tracker of the sentiment in the financial newsletter circuit. When this group gets too bearish, the market typically rallies as it did in Mar/April until. After such a long rally the market tends to get too bullish and hence a correction happens. Oddly and maybe not really that oddly, the average newsletter is more bearish now then it was in April. Everybody continues to expect the correction that won't happen as long as everybody expects it. After big recessions and bearish markets there has been a tendency towards long rallies without a 10% correction. Based on the Leading...

Still amazes me how little attention the Leading Economic Index from the Conference Board gets from the market. The Conference Board reported a September number with a 1% increase and a 5.7% 6 month growth rate. This forecasts huge growth in Q4 and Q1 but oddly the head of the Conference Board stills tells a cautious tale. With a 6 month rate at the highest since 1983, its difficult to see any negative scenarios for the economy. The Conference Board Leading Economic Index™ (LEI) for the U.S. increased 1.0 percent in September, following a 0.4 percent gain in August, and a 1.0 percent rise in July. "With the sixth consecutive increase, the LEI's six-month growth rate has improved to its highest pace since 1983," says Ataman Ozyildirim, Economist at The Conference Board. "Except for average workweek and building permits, all the leading indicators contributed positively to the index this month. At the same time, the contraction in the coincident economic index h...