dude, I am scared, can you comfort me ???
Why The Market Isn't Rising from John Mauldin
First, from Richard Russell's Dow Theory Letter daily comments
(www.dowtheoryletters.com with permission):
"Let's follow the money, which mean following the stock market. This
is what I'm seeing. My Big Money Breadth Index broke to a new bear
market low yesterday -- well below its October low. This indicates
important big money saying "bye" to this market.
"My Most Active Stock Index broke to a new bear market low
yesterday, for the first time plunging below its October low. Again,
institutional money moving out of the market.
"Lowry's Buying Power Index fell to a five year low yesterday, well
below its October low. This indicates a declining interest in
accumulating stocks. Lowry's Selling Pressure Index rose above its
"sell signal" level (up over 25 points from its recent low). This
indicates a desire to unload existing positions.
"Daily new lows on the NYSE are starting to climb above daily new
highs. This means more issues are breaking support.
"We are seeing an increasing number of "distribution" days on the
exchanges. These are days when the market declines on increasing
volume compared with the preceding day. "Distribution" days are days
when institutions reveal their desire to unload stock positions.
"We saw our first "distribution" day of the new year on January 6.
On January 15 and again on the 16th the market declined on rising
volume. Then yesterday we saw another day of distribution as the
market declined on expanding volume.
"All the above indicate steady deterioration in the technical
understructure of the stock market. All the above indicate declining
demand for stocks and an increasing desire to move out of existing
positions.
"I want to say a few words about the Utilities. These companies are
sensitive to the demand for energy, interest rates, and government
regulations. Utilities often lead the rest of the market. Yesterday
14 of the 15 D-J Utility stocks were down. At its recent low of 162
recorded at the October lows, the D-J Utility Average was at its
lowest level since 1988, at which time the Dow was selling below
3000. Something to think about."
Then Art Cashin of CNBC fame writes in his private letter:
"Caught Between Iraq And A Soft Patch - With everybody but the
Cartoon Network doing all Iraq, all the time, investors are buying
into not buying till the shooting starts. Traders, however, aren't
so sure that Iraq is the market's only obstacle. But it is the
focus of media attention.
"The Market Climate - No Global Warming - The market seems to churn
on between 1.2 billion and 1.6 billion shares each day. Traders
feel that, with between 35% and 45% coming from "program trading"
and - maybe - 10% coming from lottery tickets ("it's under $2, ya
gotta buy it") - the market is somewhat stagnant. That, they
believe, is because sellers have been hibernating.
"Wait, you say. Hasn't the market gone down 100 or 200 points in
several days? Yes, it has. But that's not a crush of panicky
selling. Rather, as we have noted, those days are buyer's boycotts.
"Let's start with a little Wall Street folklore. 'There is not
always a reason to buy but there is always a reason to sell'.
Buyers can postpone due to mood, info, price or a hundred different
things. Sellers are different even if the economy's booming and
peace is on the land - estates must be settled; tuitions and medical
bills paid, etc.
"So.....traders believe that most 'trading' sellers are on the
sidelines. Not - 'sold out' - but rather reluctant to sell at 'such
low prices' as media types reassure that "we've bottomed". That
leaves the direction of the market - for the time being - in the
hands of the buyers and the above noted 'sellers for cause.'
"The logjam could break either way, of course. The economy could
perk up and buyers might pay up. Or.....heaven forefend....we could
make new lows bringing the disillusioned out of hibernation. Any
wonder the battle [by the bulls] to hold Nasdaq 1300?"
|
