Earlier on, John Murphy was very bullish expecting the DJIA to break through 8300 "any time now". When it did not perform like this two times in a row, he turned bearish. I think his extreme bearishness is a reaction to a failed predition on his part. Of course he went to the back issues of his newsletter selecting statements and phrases that "prove" that he predicted this bearish market action saying "I told you so" when this was actually not true. This guy is definitely invested in his image. I think he felt embarassed. He did get attached to his prognosis and what he wanted the market to do. For I saw good evidence at the time that the market was not going to approach and break through 8300.
Still, there has been allot of technical damage that will take time to improve. Breakiing down through and remaining below 200 day MAs has its consequences. Perhaps there will be rotation of assets between sectors? Sectors and industries that are not impacted bythe Asian situation may be on itnerest here. Right now I think we are seeing bouyant enthusiasm by the traders that has been there for a period of time as demonstrated by the market's resiliency, which would be good news were it not for the institutional sellers that I hear have been selling in their exit from the high-tech stocks. It seems to me that the traders are optimistic, and the longer term money is still rather pessimistic. One reason that makes this possible because of the two different times frames they operate in. IMO this has helped create a volitile market.
Can anyone confirm this mutual fund selling over the past month?
Mutual funds nowadays are more competative and performance oriented over the shorter term compared to the past where they would tend to hold for the longer term of one or more years out. They cannot stay with an investment that has not paid off like they were more willing to do in the past. The techs as a group have not been paying off. So they sell the techs. The tech stocks blaming their earnings slump on the Asian market crisis and saying this problem will not go away soon has not helped here. However, the fundies cannot afford to stay out of the market, so they look for a place for their money. In the past, it has been to more defensive industry sectors, the bond market, and even cash. I imagine until the market forms a bottom and starts to show strength, the funds will continue to move to more defensive postures.
Does anyone see where the money has been moving to recently? Or are the funds still sitting on their cash?
Until the institutions like the funds participate in a market rally, any market rally IMO will not be sustainable. I do not see a sustainable market rally happening until some of the "unknowns" in the market have been determined, for the market does right now have a fear of the unknown. This includes formost the results of this earnings season, also the effect of the Asian troubles on corporate profits, and as a secondary matter, the yield curve and what its inversion can do to the markets. Matter of fact, I think any determination of the above events can result in the market moving up. In reality, I think it really is too early to determin the impact of Asia on our markets. Perhaps after earnings season is over with, the market will be able to convince themselves that "Asia is old news. It looks like the trouble is not so bad. It is time jump back into the markets for more profits". What may help here is some positive signs that the Asia markets may be bottoming which is what is being implied by Martin Pring and his newsletter.
As the earnings season unfolds, I think people will place more emphasis on the forward looking statements that will be made by comapneis at their earnings announcement. But also I detect a speculative enthusiasm that has been returning to the market where we may see more examples of stocks moving up after they have announced missing their earnings warning by a few cents, like Motarola. This is opposite of what would of happened to the stock in the past. These market players now seem to be looking for that silver lining in the cloud. They are impatient and interesting in making more money in the stock market. Instead of seeing the earnings shortfall in the backdrop of slowing earnings growth rates, they appear to be telling themselves that it could of been much worse.
Any comments or feedback? What have the technicals of late been for the market? Has the amrket already bottomed out as some think? Or is this more of a pause in the selling that has been taking place in the market? My PC is right now unavialable for TA.
Bob Graham |
