From the bull market report.. <<COMMENTARY
------- Note -------
Tonight's report is somewhat different in format than usual due to the
tremendous volatility that we have seen in today's markets.
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Ladies and gentlemen, get a helmet, because apparently the sky is falling.
At least that's what it felt like for a lot of investors today, as many
watched their favorite stocks get absolutely pummeled and their portfolios
get trounced on. Today had all the signs of a crash, especially when the
Nasdaq reached the negative 500 point level, the worst drop in history and
the equivalent of 1550 Dow points. The Dow was down over 500 points and
was still considerably stronger than the Nasdaq The bond market shot up
on a flight to quality. There was genuine fear and panic selling in
equities. The S&P Futures were halted twice. There was discussion of
halting trading on the Nasdaq, even though, unlike the NYSE, there are no
official levels at which trading is halted.
There was absolutely nowhere in the market to find solace. Those who
couldn't take it had no choice but to go into cash. There were no other
options. When an individual investor found that his or her "pain
threshold" was exceeded, they simply sold their position and took their
medicine, especially those on margin who were destroyed today.
Unfortunately for a lot of people, many sold at the bottom of the day,
when the Nasdaq was down 13.5%. The intraday recovery was nearly as the
dramatic as the initial drop. For all the frightfulness of the of losing
more than 500 points off the Nasdaq, it was nothing compared to the joy of
watching the market claw and scrape its way back up, eventually crawling
back above 4000. When the Nasdaq hit 4000 on the way back up, if you
opened your window and put your hand to your ear, you could just barely
hear a low rumble. That rumble was the sound of thousands of investors
everywhere, sitting in front of their computers and cheering. (Actually,
it happened twice -- once for all the people with real-time quotes, and
then 20 minutes later for everyone using delayed quote services!)
Some stats: Volume on the Nasdaq was 2.8 billion; 1.5 billion on the Dow.
The Dow had the biggest one day point swing in history: 700 points; 634
points on the Nasdaq, also a record.
What should we all be learning from today's experience? Well, first of
all we should be more in tune than ever with the fact that the markets are
more volatile than anyone ever imagined, maybe even us. We said that 2000
was going to be the year of volatility, but this is just incredible. The
Dow had a 700 point swing today, and that is the index that is supposed to
be more stable!
So, what do we do now? There is no answer that we can give you that will
solve all of your concerns. There was some good news at the end of the
day that we hope will have positive effects on the market in the future.
For one thing, the long bond closed at 5.74%, down 15 basis points. This
may preclude the Fed from raising rates anymore for a while. Secondly,
the market made a tremendous comeback, rallying 80% of the way back on the
Nasdaq. There were buyers in the wings with tons of cash when the last
short was squeezed to death. And they bought stocks like they were going
out of style. Which ones came back the most? After hitting $119, Intel
closed at $133. After reaching $85, Microsoft closed at $89. [Ed. Note:
This is the buy of the month, in our opinion.] Yahoo had a huge swing,
closing 34 points above its low of $133, actually rising 5% for the day to
close at $167. Quality was the key to success today.
This should be a short term lesson for us all. When things look the
worst, it is the time to be buying. There is a book called "Blood in the
Streets" by James Davidson. It's a book for you doomsdayers out there.
It is good reading, but consistently wrong for the last decade since its
publication. Today was a day to be buying when there was blood in the
streets. Tomorrow? No one knows at this point in time, but the previous
24 hours saw the Internet add 200,000 people that have never been logged
on before, and there were over 300,000 PC's installed around the world.
Maybe this is why Cisco was up for day to $73, after trading at $64! This
is why we can be comfortable with our Internet infrastructure stocks in
our long term core portfolios.
And, on a final note, we would like to point out that the alcoholic
beverages sector was up 3.5% today. Feel free to insert your own "the
market needed a drink" joke here.
Good investing for the rest of the week.
Todd Shaver
Editor in Chief
The Bull Market Report
Washington, DC USA>>
Greg |
