Tom,
>>my sense is that we are now likely to rally strongly for a few day and retrace part of the decline--but still a rally within a down-trend.
From what I read on SI (granted, the bearish side of it), it is the general feel that most coherent posters expect a short term rally, and more and more people are convinced that we're in a bear market already. Although the GLOBEX trading suggest a strong +2% open, it is very for me to accept the possibility that the market can actually rise that much at the open.
Technically, a rally to check Wednesday's highs is a plausible outlook, and with the help of world markets, AG comments and the oversold condition of the market does look like a high probability call, but I'm uneasy with this prediction. Maybe I'm looking to deep and ignoring Okam's razor, but here's my reasons:
1. Stock charts look (mostly) bad short term. If PG and MRK start rising today and tomorrow then we're still in a bull market, and MSFT will shortly make new highs. Since I assume we're in a bear market already this will not happen- MSFT, PG and MRK will end the day down to go along with their trend, and the indices HAVE to be affected by those three giants.
2. World markets' rally can be explained in the opposite way- They use labor day long weekend to rise while the Big Brother isn't watching.
Japan- Monday's rally was explained by pension funds buying by orders from high windows, to keep the Nikkei over 15,000 by the end of the month. Some say that if the Nikkei end this quarter under 15,000, then the whole Japanese banking system NAV will be less then zero.
Europe- The CAC 40 is the only major index in the world still holding above the 200 dma mark. The DAX is still under 5000 (also the 200 dma) even after the recent rally, the chart shows an ascending wedge, held by the 5000 from above, and rising bottom for the last three days. Should the DAX cross the 5000 in a decisive manner, then one should say the bear market for the DAX is over- again, that against my belief. FTSE chart looks awfull, and indeed this index is down today.
3. Greenspan's speech and other weekend events-
First, the Rubin- Miazawa (sp?) meeting beared no fruits. Bad news.
Second, what did you expect? That AG would say "I told you so" and read from Pretcher's latest market letter? Here's a good comment I found Message 5690673.
4. I can't see any non index related buying coming. No sound investor should buy PG, CSCO or MSFT for the long term today. What's the hurry?
OTOH, everybody wants to use this rally to exit some more.
Conclusion:
-If it holds for an hour, it'll hold for a day.
-I have my suspicions.
-If the market doesn't sustain the rally and crosses to negative territory within the first hour of trade- run for your lives.
-The bear market is about to go thruugh the first real test.
ATG |
