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Tuesday, March 25, 2008

March Consumer Confidence Falls to Five Year Low

Worsening job prospects, rising prices, tight credit markets, a 20% decline in the stock market all contribute to drive March consumer confidence (press release) to a 5-year low. The Consumer Expectation index is at a 35-year low reaching levels not seen since December 1973 when the Oil Embargo and Watergate caused the expectations index hit to hit 45.2.

The director of the Conference Board's research center, Lynn Franco, said the latest index reading was the lowest since 61.4 in March 2003, just ahead of the U.S. invasion of Iraq.

  • "Consumers' confidence in the state of the economy continues to fade and the Index remains at a five-year low (March 2003, 61.4). The decline in the Present Situation Index implies that the pace of growth in recent months has weakened even further. Looking ahead, consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon. The Expectations Index, in fact, is now at a 35-year low (Dec. 1973, 45.2), levels not seen since the Oil Embargo and Watergate."

Chart courtesy of Martin Capital

Note that the last low was in March 2003.

March 2003 was the test of the October 2002 S&P500 bottom.

Chart courtesy of

Stock market bottoms don't happen when everyone is optimistic.

Some of us believe the recent weakness where the S&P500 traded in the mid 1200s may be a successful test of the January 22/23 low.

Back in 2002-2003 I had a stock, CACS, more than double between the October 2002 low and the March 2003 correction. CACS went on to be the top percentage gainer for the NASDAQ in 2003 at some 3500 percent.

This time I have VLNC that I accumulated over the past couple of years between $1 and $3. Using my sentiment indicators and my asset allocation and price targets, I sold some trading shares of VLNC at $1.97 on Oct 22, 2007. I bought them back at $1.64 in January 2008 and sold them at $2.49 while the rest of my shares in that stock are at about $4.40 now.

Given the very low consumer confidence, we could be seeing a similar buying opportunity now for the markets as we had in October 2002 and March 2003.

BTW, if anyone wants to see what my monthly newsletter sentiment update looks like, then check out this PDF file: "Take Profits & Sell Sentiment Indicators from The Market Top." The page of my newsletter is from last year with the markets near an all time high at 1540.

The S&P500 was at 1540 when I said take profits in my monthly newsletter shortly after we had all five of the indicators say BUY on a correction.

Unlike on October 19, 2007, I am NOT saying to sell or take profits now!!!

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