Today everyone expects a big rally. But I (we?) don't really know how strong the selling pressure is by the big guys. There has been aggressive selling into all rallies. The big players probably know but aren't telling us. I would not be surprised if today's rally fizzles today or tomorrow at the latest (even without any news to influence it). I certainly won't go long, not even short-term, but will probably sell some of my stocks (my HK stocks were up almost 50 % yesterday because of the government intervention) and buy more puts.
The irrational expectation of an interest-rate cut shows either how superficial the media are or that there is still a lot of bullish exuberance around.
The only good analysis I read was in the Financial Times today pointing out that no interest-rate cut is imminent and that Greenspan wants the market to correct further but in a steady, crash-free fashion. I don't know whether he has a preferred value for the Dow, but I suspect, if he does, it starts with a 6. The thing he is afraid of, and he has said that almost explicitly in his speech, is that the stock market overshoots and falls much more, which could then have negative consequences for the economy. A correction to the 6000 level would not have any serious economic consequences, perhaps cause a short, painless, potentially even healthy recession that takes some of the exuberance out of the economy (e.g. by loosening the presently tight job market).
So I will be watching out for the sellers.
Regards,
Phil |
