Just an opinion I have received from e-mail-
. Market Commentary
Traditionally the summer is a slow time in the
markets with reduced participation due in part
to holidays by both the professionals and the
investing public. This leads to the type of
volatility we have seen lately - fewer players,
poor liquidity and erratic price swings.
Last Friday afternoon was a classic demonstration
of this phenomenon. With a significant number of
market participants getting a jump on the last long
weekend of the summer by leaving early the Hedge
Funds worked their "magic." between the Chicago
option pits and the NYSE.
After somewhat of a lackluster day, around 2:00 PM
the DJIA suddenly heads straight south and is down
approximately 195 points on the session. Then,
between 3:30 PM and the close, the DJIA gain 154
points to only close down 41 points on the day.
These are the type of moves that are hard on individual
investors who cannot be sure if they are indications
of true market sentiment or, as we suspect, the work
of some very sophisticated and well capitalized fund
managers.
This type of strategy is much harder to execute when
the market has more depth, as will be the case after
this weekend.
With the banks and financial service stocks in some
cases having their valuations cut by 50%, the large
cap and/or Dow stocks are not looking as attractive
as they were. Given the large amount of money that
is still flowing into mutual funds, on a monthly
basis, there will continue to be pressure to allocate
a portion of this cash into equities-it is not
all going to end up in bond and money market funds.
As a result SNN believes that there will be a move to
the smaller cap stocks over the next 6 months. The mid
and small cap stocks have already had their correction
and some of the aggressive small cap funds are presently
showing the best percentage returns on the street. Also
the fund managers are aware that they can influence small
cap markets-not that we would ever suggest fund managers
prop up stocks, but they are under tremendous pressure
to perform.
In summary, now that Labor Day is nearly out of the way,
we think you will see a more positive tone to the
market as everyone gets back to the business of making
money.
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