Hedgehog University Market Commentary - Friday 05/09/2008

As quite often happens,  the market averages and indices either  broke 
through  or  moved up to the 150 day moving average in the last market 
week.  There is always going to be some  skeptimism  or  disbelief  at 
this stage and we expect a pullback.  

We have drawn a channel and if the lower channel is violated, we would 
look  for  support  at  a  previous low or high.  That's the way these 
markets move unless they are not moving in an orderly fashion.  

Dow Jones Industrial Average (INDU- 12745.88 - 05/09/08)

Here's a bit of commentary from Yahoo business:

TORONTO, May 7 /CNW/ - CIBC (CM: TSX;  NYSE) - A highly volatile stock 
market   has   nervous   Canadian  investors  pulling  back  on  their 
investments and sitting on record amounts of cash,  finds a  new  CIBC 
World  Markets consumer watch report.  The report finds that Canadians 
are holding onto a record $45 billion  in  extra  cash  they  normally 
would invest in the markets - a decision that could cost them billions 
of dollars in lost investment opportunities.  

"Despite the recent recovery in the stock market,  Canadians are still 
sitting on cash positions which in real terms are 15 per  cent  higher 
than  the  already  elevated  level  seen in 2001," says Benjamin Tal, 
senior economist at CIBC World Markets and author of the report.  "The 
October 1987 stock market correction lasted two months,  but investors 
sat on their newly created mountain of cash for a lengthy  16  months, 
during which time the stock market gained more than 20 per cent. Ditto 
for the 2001 flight to safety." 

By his calculations,  sitting too long on the sidelines after the 2001 
market correction,  cost Canadian investors more than $30 billion -  a 
pattern  he  sees  emerging  again  in 2008.  "Fast forward to today's 
situation and it appears that history is repeating  itself.  Investors 
are  sacrificing  billions  of dollars in potential investment gains," 
Mr. Tal adds.  

One of the main differences he sees this time round is a big  increase 
in  the  risk  aversion of younger investors.  "As risk aversion rises 
with age,  it is hardly a surprise that older Canadians are the  first 
to make a beeline to the safety of cash.  However,  what is surprising 
is the near 40 per cent contribution of Canadians  age  25-49  to  the 
current  liquidity  reserve.  This amount is twice as large as what we 
saw in 2001." 

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