If most everyone is sitting with cash, you are probably right and no such sell off will occur. I doubt, however that that is the case. You also must take into account, however, that the events of the last nine months have changed market psychology quite a lot, what we had was not a short Naz decline like in 98, or something limited mostly to the semi sector. I think that we have run into a typical cyclical readjustment, where overcapacity needs to be absorbed. It is not the "end of the world", but like any cyclical situation, it needs time to create a new balance.
There are some voices claiming that IT spending and telecommunication spending will have to slow down, because we gorged ourselves on these in the last three years. So much, that currently, financial markets do not seem to be ready or willing to provide the lending necessary to continue at the recent spending rate. The Fed's may lower the cost of money, but lenders, fearing for their principal, may actually exact higher rates of returns to compensate for what they consider excessive risks. It may take more than two fed's reduction in rate to restart the process again.
There are additional "anecdotal" stories, pointing to the possibility of a harder than expected landing, but frankly, I have not the slightest what will be the outcome. It is clear we have some slowdown, whether we slide into a recession (or are already in a recession) is a question to which I do not have an answer.
Technically, we are just at a "chicken" point, the sox, actually held above 700 and closed above that critical point two days in a row. The Naz, has run into a natural barrier at 2850, so, it is a "coin flipping" situation for me (from a technical point of view). Originally, I had the 2850 as the high for January, with a potential run to 3050 if the fed acted before Jan 31st, well, they did, and so I have to allow for the possibility of 3050. But, I am not one to catch the last 200 Naz points "fully loaded", I usually take some chips off the table before my target is reached. One of the parameters that actually worries me is the excess enthusiasm, we have had close to 3 billion shares days no (with not one day under 2 B ) since the beginning of the year, that even more volume than we had into the March 2000 peak, you got to ask yourself, who is not yet on "board"?
Zeev |
