Just received Russell's remarks on yesterday's market...interesting how many of them mirror the 80+ postings on this thread since the market closed yesterday.... Here are some exerpts. Hope he doesn't sue me in lieu of my helping to support his sudden emergence into the market debate spot light..... with respect then...here they are:
Retail sales for May were down 0.3%, but that didn't help the bonds. Ah, said the bulls, "the Fed will
probably stand still because of sliding retail sales." But no, oil shot up with the July contract closing at a fat
32.58!! "Ah, said the bears, "That should pressure the Fed to raise rates."
In the greater scheme of things, it doesn't much matter. With a primary bear market in force, all these daily,
weekly, monthly figures are grist for the bear market mill. In the end, the bear will fully express himself. In
the end, he will not be denied. But it's taking a LOT of time.
I'm surprised at how little publicity is now given to the fact that the discount rate is now at 6%. In history
going back to the 1920s, the discount rate has reached 6% only seven times, and each time it's meant
trouble, usually major trouble, for the stock market.
On top of that, we have an inverted yield with the T-bills yielding around 5.96%, higher than the rate of the
30-year bond which is 5.88%.
This is only a "Russell guess," but I instinctively feel we are nearing some kind of an unexpected event, a
shocker. It could be some corporation going under, it could be the sudden sinking of a major stocks
(another PG?), it could be something from the Fed, it could be an economic number -- frankly, I have no
idea what it could be, but a shocker somewhere ahead would not shock me.
I've stated before that in a primary bear market support levels don't tend to work the way support levels
work in bull markets. In other words, in a bear market support levels in the averages don't tend to support.
During a bear market I never tell subscribers to depend on support levels to stop a decline. However, for
purposes of talking about "where we are," I do refer to previous decline lows as support levels.
For instance, in the present instance I am watching the area of 10250 on the Dow. This is roughly where
the April 17 plunge halted. And it is also roughly where the May 26 plunge halted. Therefore, if the Dow
eventually breaks below the 10250 level I think there's a good chance that the Dow will then try for the
bear market low of 9796.03 closing level.
This following is important: In the final analysis, a bear market is deadly because it hits the economy. It's as
simple as that -- a primary bear market hits the nation's economy.
The stock average which IS the economy is the DOW. No question about it, if the Dow heads down on a
major trend basis it's telling us that the economy is going to be in trouble. And if the economy is in trouble,
real trouble, the trouble is going to affect almost ALL stocks, and I don't care whether it's a CSCO or an
INTC or an EBAY or a GM. Almost all stocks are going to be hurt.
Which is why at this point I place such emphasis on the trend and the action of the Dow.
Right now the Dow remains on a "sell" mode on my method of reading the moving averages. The long-term
or 200-day moving average of the Dow is now declining. As of today, the 200-day MA is at 10769.
The shorter-term or 50-day MA of the Dow is below the 200-day MA and it too is declining. The 50-day
MA today is at 10668.
On June 9 the Dow broke below its 50-day MA, and that constituted a "sell signal" on my method of
reading the moving averages. As this is written, the Dow continues in its sell mode, and it will remain there
as long as the Dow holds below its 50-day MA.
The fact that the 50-day MA is below the 200-day MA indicates weakness. The fact that the Dow is below
its 50-day MA denotes even further weakness. The fact that both the 200-day and the 50-day MAs are
both declining indicates weakness. That's the story, as I see it.
I've thought a lot about why the S&P futures are up almost every day at the opening and then after a half
hour or an hour selling often comes in and the market heads down.
I believe the higher opening is a reflection of mutual fund money (which comes to the funds daily) being
invested at the opening. After the initial buying, large interests, institutions and powerful money - often sell
into the early strength -- and after an hour or so the market heads down.
I think that large interests want OUT of this market, but they don't want to upset the market if they can
help it. So they just keep "slip sliding" their money out, day after day.
Analysts are starting to talk about "the big squeeze" on corporations. The big squeeze is a results of (1) a
slowing economy, (2) rising costs, and (3) lack of pricing power.
I keep wondering whether there's any liquidity in this market. Take a widely-held, heavily-traded stock like
HWP. Today an analyst down-graded the stocks and it immediately broke almost 9 dollars? What is that?
What kind of action is that? It's ridiculous. Where is the specialist? Is there any specialist? How can a big,
supposedly liquid stock like HWP bust 9 points in a matter of minutes?
Values: In today's LA times there's an article about Value Line and the stocks it labels #1 (best for both
timeliness and technicals). There are roughly 40 stocks out of Value Line's 1700 that meet the #1 criteria.
Here are a few along with their trailing P/E ratios. Adobe Systems 72; Analog Devices 101; Cytyc 189;
Immunex 220; 12 Technologies 463; JDS Uniphase 405; Nortel Networks 99; Macromedia 144; Rambus
500 and Techne 87.
Would I buy these? Not with these P/Es and I don't care if they've invented perpetual motion. They're too
damn expensive.
You've probably seen the current two-page ad from Barclay's regarding their ishares or exchange-traded
funds (ETFs). These are index stocks (traded all day like any other stocks) which cover 50 different
sectors, sectors or averages from the S&P small caps to the Russell 2000 to the D-J US energy sector to
MSCI Sweden. These ETFs are all traded on the Amex. For info call l800 - ishares or online at
www.ishares.com. The rise of the ETFs is almost guaranteed to hurt mutual funds. Personally, I wouldn't
think of buying a mutual fund when I could buy an ETF.
By the way, there have been numerous complaints about the online brokers who sold out people on margin
during the Nasdaq smash, sold them out in many cases without even giving them time to answer their
margin calls. Of course, the time-honored advice is -- "Never meet a margin call." Let them sell you out. A
margin call is the market's way of telling you that "You are wrong."
Is everything going wireless? I've thought so all along. The hot sector of the market can be called the
tele-net area. This is the confusing world of cellular, fiber-optics, wireless telephone, semiconductor and
networking. The theory is that this is the future, and no price is too high if you want to buy a piece of the
future. You want a piece of the so-called future? Buy the ETF sector that deals with Telecommunications --
symbol on the Amex iYZ.
Market Action, and I'm going to be brief. Today was a pretty good day all around. Dow up 57.3 to
10621.84. Transports down 26.63 to 2754.87. Utilities up .70 to 329.77.
Advances 1739 and declines 1187; I added .16 to the A-D ratio, taking it to minus 6.41.
There were 65 new highs and 51 new lows.
Volume moved up to 914 million shares.
The S&P was up 23.48 to 1469.48.
Nasdaq was up 83.21 to 3851.12.
My Big Money Breadth Index was up a rare full 10 to 977.
It looks like the bonds were up on the rumor of declining retail sales - the then they sold off on the fact (the
news). The long T-bond was down 29 ticks to yield 5.94%. The ten-year T-note was down 7 ticks to yield
6.11%.
My PTI was up 4 to 5127 with the moving average at 5145. The PTI is now only 18 points below its MA -
let's watch this.
Gold was up five bucks in the morning, but damned if they didn't knock it down so that August gold closed
down a dollar to 288.10 Silver at 5.02 on July, platinum down 2.90 to 541.10 and palladium zooming 20
bucks to Sept. 667.30. Gold shares nowhere with NEM down « a 24 ¬ and SWC incredibly up only 1/16
at 30 3/8.
Conclusion: Looks like the market is tired of looking tired. So Mr. Market now wants to see what he can
do on the upside. So far, not bad. PTI looking better, A-D ratio at a recovery high, but volume on the
upside still suspect. Although volume may pick up if prices continue to rise.
Me, I'm flexible and open-minded. Give upside a chance.
All this will keep the public happy and mutual fund-ers continuing to send the paychecks to their favorite
mutual funds.
Oh yes, I'm watching AOL, which was down 1 ó to 51. This bear is one sneaky animal, and somehow one
by one he's hurting an awful lot of stocks - and all this while the "market" still looks good. Amazing. |
