Fleck: Rally Expiration Date Stamped 'Uncertain'
By Bill Fleckenstein
05/05/2003 17:58
Muscle Shirts and Sox: In overnight action, there was nothing too remarkable to report, except that the markets open for business were mostly higher. Our market opened firm, had a quick blast, and then a selloff that took the Dow and the S&P mildly red. But the Nasdaq was firmly green, led by the SOX, which was up 3% two hours into the day. I'm not sure exactly what caused the frenzy, but my guess would be performance anxiety on the part of folks trying to chase fast-moving stocks.
Later in the day, the Nasdaq, led by tech stocks, again tried to drag the Dow and the S&P to the upside. But that rally fell apart, and we wound up with the prices you see in the box scores. The tech rally appeared to run out of steam when rumors began circulating that Intel INTC had canceled some one-on-one meetings after the conference it was attending. (While that may be true, I doubt it's very meaningful, given where we are in the quarter.) Also, some psychological warning signs may be surfacing. When Barron's puts a bull on the cover, or analysts crow about framing their trade confirmations, perhaps the rally is due for a breather, at a minimum.
Little-Tyke Upticks: I would just note that away from the more heavily traded, bigger-cap tech stocks, some smaller fry have gone wild. In small-cap land, for example, check out the charts of these screamers: Ask Jeeves ASKJ , Coast Dental Services CDEN and BioLase Technology BLTI ; or, in slightly bigger-cap land, Biosite BSTE or Garmin GRMN .
Away from stocks, the dollar was getting smacked once again, with the euro and the yen both up about 0.5%. Gold and silver were also up about 0.5%, catching a small bid on the back of the dollar's weakness. Fixed income was up fractionally.
Of Q&A and TBA: For folks who may not be aware, Warren Buffett held his annual Berkshire Hathaway BRK/A meeting over the weekend. I always like to know what he is thinking, and for anyone interested as well, please see a fine reprise of his Q&A by RealMoney's Chris Edmonds.
Turning to the Rap's own questions box, I have heard from a number of readers who want to know when the rally will end. The short answer is, I have no idea. Elaborating on that will take a bit longer. Back in my column on Feb. 12 , I opined that if prices were right, I would be wildly bullish. I thought that a lot of people were very bearish for what I considered to be the "wrong reasons." Folks were buying duct tape, as they feared a terrorist attack. There was a lot of angst about the war. Index Close Change
Dow 8531.57 -51.11
S&P 500 926.55 -3.53
Nasdaq Composite 1504.04 +1.16
Nasdaq 100 1136.36 -0.25
Russell 2000 409.78 +2.11
Semiconductor Index (SOX) 347.16 +4.13
Bank Index 801.69 -5.05
Amex Gold Bugs Index 133.19 +2.37
Dow Transports 2473.55 +12.75
Dow Utilities 225.11 +0.52
NYSE advance-decline +450 -1,309
Nikkei 225 7907.19 +43.90
10-year Treasury Bond 3.89% -0.026
Nine Shelf Lives of a Sugarplum: I felt that given the level of war angst, the relief rally and fantasy rally I anticipated could get especially pronounced. I was optimistic about a successful prosecution of the Iraq war, and that it would cause folks to become quite hopeful about the economy. The feel-good mood would be helped along by our passage from earnings season to the no-news period where we are now. (Stoking the dreams further, semiconductor companies have met their estimates. These are absurd at current price levels, but that never bothered folks hell-bent on speculation.) During this particular time in the quarter, fantasies abound about a brighter tomorrow. It's a mind-set that we saw in the bull market, and it has remained intact in the bear market as well. When corporate America is not fessing up, there is nothing to stop those sugarplums from dancing in people's heads.
So, I wanted to give the market rally plenty of rope, and not be too hasty about trying to fight the crowd. My plan had been to sell a "failing rally." Whether I will get the chance to do that,or whether I will have to change my mind, I don't know. Trying to make a stab at market direction is pure guesswork. But I have learned over the years that when operating on the short side, one must be very careful when choosing to get short. Even during this bear market, it's been difficult to get folks to focus on reality, since the bias toward fantasy has prevailed.
In Lieu of Prescience, Patience: As I have thought about all of this, it's occurred to me that we could see one of the best bear market rallies of the entire bear market in this period. That doesn't mean we will . For all I know, the bear market rally could have ended today. It is not possible to know the outcome of this evolving process. I just hope I'm fortunate enough to recognize the end of the rally when it occurs.
I have not bought any stocks except for a brief period around March 13, because in the aggregate, I find stock prices to be too expensive -- way too expensive. If I bought something and it went against me, I would quite likely be shaken out. I cannot buy something that I think might be worth $3 for $10, hoping to sell it for $12. So, except for the aforementioned period, I have not tried to capture this rally from the long side, preferring, instead, to wait for a chance to re-establish shorts and put positions when I think the time is right. |
