"The market is very emotional and there's lots of panic selling. We're now seeing irrational depression," remarked Peter Cardillo, chief investment strategist with Global Partners Securities.
Looks like the numbers past week support that sentiment:
Index Started Week Ended Week Change % Change YTD
DJIA 8684.53 8019.26 -665.27 -7.7 % -20.0 %
Nasdaq 1373.49 1319.05 -54.44 -4.0 % -32.4 %
S&P 500 921.39 847.75 -73.64 -8.0 % -26.2 %
Russell 2000 413.28 386.19 -27.09 -6.6 % -20.9 %
And maybe an initial bottom in tech that the "safe" stocks should follow as the Dow/SP hit ranges where even bears think they aren't too unreasonable:
Updated: 22-Jul-02
General Commentary
For the first time in recent memory, the tech sector demonstrated relative strength against the broader market. The Nasdaq finished the week with a loss of 4%, compared to declines of 8% each by the Dow and S&P 500. But the real story within tech was the ability of major groups such as Software (+3%), Biotech (+3%), Semiconductors (+3%), Biotech (+1.3%), and Telecom Equipment (+1%) to post gains on the week. Strength in these areas was primarily a function of the enormous declines already suffered and the fact that the safe-haven stocks that had supported the Dow and S&P are now looking less attractive on relative valuation basis. Respectable groups such as Financials (-20%), Utilities (-18%), Household Appliances (-16%), Retail (-13%), Beverages (-12%) received a cold dose of reality this week. Allowing certain industries within technology to avoid the red was massive short-covering.
While on the subject of short sellers, you should know that they have completely taken control of the market. Sure, some may have gotten squeezed a little this week in tech stocks, but only after racking up enormous returns. Others closed out positions on their own accord -- freeing up funds to initiate new short positions in NYSE stocks. About the best to be said for this activity is that "at least someone is making money." Also important to keep in mind that momentum shorting has set up many stocks for aggressive recoveries as individual bottoms are established.
Earnings season has provided little relief to the market; in fact, it seems only to have multiplied the problems. Given the market's reaction to fiscal Q2 financial results, investors hardly looking forward to next week's reports-- Mon: CHKP, LXK, ALTR, CA, NVLS; Tues: WAT, AMZN, EXPE, AMCC; Wed: BOBJ, EDS, ESST, FFIV... See Briefing.com's Earnings Calendar for a more comprehensive list of earnings due out next week.
Able to leave you with one positive. The conspicuous shorting opportunities have been drying up rapidly, suggesting that excess is finally close to being wrung out of the market... Looking out the next several months, I am more concerned about the outflow of capital from mutual funds than the antics of short sellers. |
