Paul,
Message 16359889
Let's examine and update my prognosis
Monday
>>Stocks will be down on Monday. I do not expect a '87 style crash nor a minor move.
Check.
>>My guess is that big boys will be buying around S&P 960-990 (around 10%-12% decline) so that should be a good place to start buying for a ST bounce. The low for the day could reach S&P 900 area at the extreme (17% decline) and there should be a big improvement towards the close if it ever gets that low during the session, which I doubt.
>The bigger the decline and volume, the stronger the end of day rally.
The market didn't make my downside targets and therefore had no end of day rally.
>NASDAQ is not going to be the big issue. It is usually more volatile, so the %age decline could be bigger the the NYSE, but compared to historical volatility IMO the Naz would be hit less.
Check.
>S&P should close between 5-8% down.
Check.
Tuesday
>Unless Monday closes with only minor decline without the big volume, Tuesday should be up in the morning. The immediate reaction of an extremely oversold market that took an exogenic extra hit.
Check. The S&P almost reached my 8% decline target on Globex and made nice improvement till noon.
>No new shorts will be opened until after the expected rate cut, which could be delayed. Selling power will therefore be weak without news. So lower volume and volatility on Wednesday and Thursday
Greenspan (and the rest of the world followed) threw in the 0.5% too soon IMO. I think better to let the market run its course and give the boost after the downside pressures have dwindled. The way it was the sellers have nothing to fear in way of good news. So the market didn't crash (it wouldn't have crashed anyway) and selling pressures remained strong. NYSE volume was very big on Monday and no reversal followed. Not a good sign.
The market is extremely oversold - Look at the 3-13 and 5-21 MA diversions, 13 days RSI etc. A nice IT bear market rally is only days away but who knows how much more ground stocks will lose till the reversal. I still see SPX 960-980 as the support area but if Donald gets a negated signal who knows.
The sabotage and loss of life, surely one of the saddest events in this proud nation's history, will have little direct effect on the economy.
The bigger effect on the economy will come from a probable longer term change in consumers mood resulting in lesser spending and higher savings rate. Bull and bear markets are mainly the investors LT state of mind. When the state of mind is "we are Invincible" (and the rest of the world nods in agreement and says "yes they are") you get a bubble. Same was in Japan in the late eighties. When the future looks darker every week you get a vicious bear.
As I see it stocks are still priced on hope more then anything else. They will eventually be valued in discount to the strictest measures (dividend yield?, free cashflow?, stripped to the bone net assets?) when the bear will be over. So there's still a long way to go.
But we still need a healthy bear rally to give the big boys yet another opportunity to unload their extra baggage before the next leg down. October is a very good month to start a bear rally that could last till the spring. I have no problem with the Naz starting a bear rally from here, but the NYSE didn't lose that much in value to allow room for a big bear rally.
So my conclusion is there's little time left to this big leg down, but maybe not so little %age.
ATG |
