A Treacherous Market Faces Resistance
By Ron Taylor
10/25/2001 10:52 AM ET
Investors are wading through more economic data today, with initial jobless claims increasing by 8,000 to 504,000. Meanwhile durable goods orders fell 8.5 percent relative to consensus estimates for a 1.0-percent decline. The economy continues to weaken, despite the fact that the fed has lowered interest rates nine times. The last time the fed cut rates this many times was a not so bright period in our country's history called the Great Depression. The market continues to hang in there in spite of the September 11th events, and despite another round of terrible earnings announcements. There is something to say about the resilience of this market.
This all being said, the bulls used up a lot of firepower yesterday. Broadcom (BRCM - 34.08), Brocade Communications Systems (BRCD - 23.78), Qlogic (QLGC - 39.35), Juniper Networks (JNPR - 24.75), all the names traders used to love up over 10 percent yesterday. These were real big moves, yet the Nasdaq Composite merely managed to eke out a 1.59-percent gain on the day. The former leaders screamed "follow me." Unfortunately, nobody did. That is how the market forms a topping process; capital is put to work moving individual equities resulting in no net movement on the indices.
What about Monday's big rally, you ask? Would it surprise you to find out that Goldman Sachs had a 100 million share $1.85 billion dollar IPO scheduled for Tuesday's open? Goldman wouldn't put all their spare trading capital to work buying S&P futures Monday to pave the way for a well received IPO on Tuesday? Would they? I bet they did.
The market continues to face resistance at its prior lows, which I have talked about on numerous occasions. The market has also experienced the reversal of two significant moves higher on October 17 and 23. All this activity spells one thing…distribution. This market continues to be distributed by institutional investors to retail investors. Recent Wall Street Journal articles point to this, block trading numbers point to this, and history points to this. Do not be fooled by the media or the perma-bull gurus, this market remains treacherous.
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