Interesting Fleckenstein:
Back to the futures... Japan was down 3 percent last night and shortly
thereafter the S&P futures on Globex exploded to the upside. I happened
to be in the office late last night and I pulled this quote off the
Bloomberg: "Japanese stocks pare losses as S&P futures suggest U.S.
bounce." The article went on to say that the Japanese stock market
erased an early decline of more than 400 points following gains on the
S&P 500 futures, suggesting U.S. stocks may rebound.
We know that the Hong Kong monetary authority is willing to rig its
market and we know that the Japanese are certainly willing to rig their
markets, so what the heck - why not buy a few spoos and diddle our
market to help their markets? I don't know if that occurred, but I
wouldn't be the least bit surprised.
Europe rallies... Predictably, Europe was weaker but then rallied on the
anticipation of a better opening in NYC. We certainly got the bounce we
wanted on the back of Abby Cohen of Goldman Sachs, increasing her
exposure to stocks. After all, they do have to get the deal done, don't
they?
Market seesaws, recovers... Last night they had the S&P futures up 3
percent, and they opened them a couple of percent higher. We had a
violent rally to start, followed by a big wave of selling, which took
the futures down about 1 1/2 percent. Then we had a rally that lasted
all day and was pretty much across the board.
Tech names were the strongest as measured by the Morgan Stanley High
Tech, followed by the Nasdaq 100, the Nasdaq itself and the Sox. The
bank stocks were kind of the laggards, up less than 4 percent. The S&P
futures closed at 1000. It will be interesting to see if 1000 becomes a
psychological barrier for the S&P futures. Will they go back and forth
over the 1000 mark, or will some other barrier become the psychological
barrier?
Volume today was enormous, and we have seen more and more volume lately.
Today was the biggest day ever with more than 1.4 billion shares trading
on the Nasdaq and 1.2 billion in NYSE. All the people who want to talk
about the high-volume reversals will point to this. This type of a rally
was somewhat predictable, as we have pointed out recently, although in
these highly fluid situations you never know.
I would continue to advise what I have been saying: Sell into the
rallies, don't buy the dips. Regarding some of these tech stocks that
have bounced really hard, recovering nearly all of their losses from
yesterday, I would guess that their rallies wouldn't last much past
tomorrow morning or midday at the latest. After all, we are about to
head into the bad-news earnings season.
Before the latest meltdown, which was induced by a global destruction of
capital, we had been looking for pronounced earnings weakness out of our
favorite stocks - the PCs, the equipment stocks and the semiconductor
manufacturers. I think there is a lot of bad news coming, which will set
off another wave of selling along the way.
My guess is, when we take out the lows that were achieved this morning,
there will be another waterfall decline like the one that took out the
somewhat significant level of 1055 in the S&P (the bottom of the
previous decline). What happens in bear markets is whenever a "line of
support" is broken, you have a waterfall decline and everyone tries to
find a new line of support. Support never holds, and what used to be
support becomes resistance.
As I see it
In other action, the dollar took a big hit today. The spanking started
yesterday, and I can identify two reasons.
First, all of these hedge funds that are busy blowing up around the
globe have been funding themselves in Japanese yen. When you fund
yourself in Japanese yen you have to short the yen, then go buy the
currency you ultimately want to speculate in. Now they are being forced
to cover yen shorts. (I think they also might be short JGBs, which now
are yielding .995 percent. How about that yield for a 10-year bond?)
Second, anticipation that the Fed will lower interest rates is weighing
on the dollar.
By the way, don't try to trade the Chinese yuan on the black market
there: China announced the death penalty for those caught profiting from
that. In addition, Malaysia announced the end of convertibility last
night. Can't trade the ruble, yuan or ringitt. What's next? |
