Don Hays Market Comment
January 5, 2000
You're probably expecting a very detailed comment from me this morning, but
it is not to be. The flu bug came to visit me yesterday as the cold, cold
breeze of the market sell-off was sweeping across the world. So my primary
motive today is to get back to bed. But with the sharp sell-off I can't
totally cop out, so here I am. The similarity with the 1972-73 market
continued for the last two days. In 1972 the hot bubble was in the
Polaroid's, the McDonald's, the Avon Product's so the index that gave them
extra weighting, the S&P 500 had made a new high in late December, and then
even though the advance/decline line was falling once again, that index made
one last high on the first trading day of the year. This compares with the
NASDAQ composite's new high on Monday. The next 7 months were almost
continuously down. When you have markets such as we have been having, led
by the momentum players, who don't buy on pull-backs, but rather on upside
break-outs, the first part of a bear market doesn't faze them, since they
are still confident the next upside breakout is right around the corner.
But after a few weeks of mayhem, they then change to a mindset of getting
out when they can get back even. Of course the market doesn't accommodate
them, and finally they turn into margin calls and a forced exit. That leads
to a buying juncture.
But yesterday didn't scare anybody. The CBOE put/call ratio was only 55%.
The commentators were saying only a few days of this, and then the market
would get back on track. I expect this market to continue to follow that
1973 trek, so stay tuned. Hopefully this bug will make a short and quick
departure, but I know that sounds like a momentum investor on the first
serious downsweep. |
