IBD: "Bear Market Deepens On Election Turmoil"
>>>Friday, November 24, 2000
Bear Market Deepens On Election Turmoil
Investor's Business Daily
Sessions before a holiday are usually quiet, benign affairs. But pre-Thanksgiving trading brought out the worst in the stock market Wednesday.
Of course, the market typically isn't trading through an election crisis while the tech sector battles the worst bear market in almost three decades.
The Florida recount buffeted stocks throughout the day. The market sold off early following the state Supreme Court's decision to extend the deadline for hand-counted votes until Sunday.
Stocks started to rally when Miami-Dade County called off its hand count. But sellers regained control as the legal wrangling between the Bush and Gore camps intensified.
The Nasdaq bear market was a fact of life long before anyone dreamed of an electoral standoff in Florida. It took another step lower as the tech-dominated index fell 4%. The Nasdaq composite has sunk 46% below its March high, the worst sell-off since falling 60% in the 1973-74 bear market when the index was still in its infancy.
Nasdaq volume increased 8% to 1.88 billion shares. Preholiday sessions are usually lighter, which makes the distribution all the more noteworthy.
Despite dropping 21% since the election, the Nasdaq isn't showing signs of a bottom. Volume, which has been below average, is far from reaching a climax.
Not all bear markets end in a final frenzy of trading. But sellers usually turn panicky. They've shown remarkable restraint so far.
Fear was rising last week, as measured by the put/call ratio. Option players calmed down this week, pushing the ratio back into the 0.60s. Even more amazing is the Investors Intelligence survey of newsletter writers. Amid the Florida machinations, bullish advisers jumped to 55% from 50.9% a week ago.
The crowd is probably finding solace in the Dow industrial average and S&P 500. But they're cracking more each day. The S&P 500 finished at its lowest close since Oct. 27, 1999. It's down 14.9% from its high. Another 5 percentage points and it will join the Nasdaq in bear territory.
The Dow is 11.5% below its high, which qualifies as an intermediate correction. Its relative outperformance isn't surprising as investors seek cover in the bluest blue chips.
Coca-Cola helped stem the Dow's slide Wednesday. The stock jumped 4 5/16 to 59 9/16, worth 26 Dow points, after the beverage maker dropped its bid for Quaker Oats.
But most of the big moves were to the downside as the bear market chewed up a few more stocks.
Comverse Technology, Siebel Systems and BEA Systems, former tech leaders that tried to withstand the Nasdaq's slide, all tumbled below their 200-day moving averages.
Brocade Communications Systems undercut its 200-day early in the session, but managed to close above the long-term line.
Investors continued to find shelter in medical and food stocks. Bristol-Myers Squibb gained 1 1/16 to 67 15/16. Safe- way rose 1 1/16 to 60 5/16 in double normal volume, its highest level since January 1999.<<< |
