To: KM who wrote (30507 ) 10/18/1999 9:20:00 PM From: Don Green Read Replies (2) | Respond to
Sentiment: the wild card Perhaps as important as rates is that intangible known as investor sentiment. Many players long for the type of bearishness that can be cut with a knife. For sure, that negativity has mounted of late, but has yet to generate the type of climactic capitulation characterized by enormous volume, plunges in leading stocks, and bungee-style volatility. Most seers acknowledge that sentiment has changed markedly, yet the word "capitulation" hasn't found its way into their collective vocabulary just yet. "I don't get a sense of capitulation," said Ralph Bloch, chief market analyst at Raymond James & Associates. "I get more of a sense that they're not panicking yet. "The market needs legitimate signs of capitulation: very high volume, tremendous volatility on both an intraday and day-to-day basis, and a crack in the strong stocks." Two important indicators of sentiment -- trading volume and options activity -- have gradually edged toward levels consistent with prior market bottoms. Friday, New York Stock Exchange turnover, though not overwhelming, was nevertheless its heaviest in eight sessions. Volume has increased over that of the prior day in each of the past four sessions. Meanwhile, Friday's Chicago Board Options Exchange ratio of put option volume to call option volume was 1.03, a level reflective of extreme bearishness on the part of options speculators. At 10 a.m. Eastern time, the ratio stood at 1.09. "Sentiment is getting very bearish at this point," said Roy M. Blumberg, portfolio manager at Sheer Asset Management. "You're starting to see options players turn bearish, investment advisory sentiment is getting bearish, and the number of stocks making new lows has picked up significantly." Volume a key What's to come on Monday? Heading into the weekend, a fair amount of observers felt that the key to next week will present itself on either Monday or Tuesday. Yet few appeared overly confident of what shape that outcome will necessarily take. "We could have a temporary relief rally at any time, but with the high valuations, the poor breadth, the interest rate situation, and the [dollar] fluctuations, you have to be very defensive right now," said Ricky Harrington, senior vice president at IJL Wachovia Securities. "If we get a couple of more days like Friday, we're probably at bottom," said Blumberg. "If we stabilize and we rally here, then it's the same story again and we're going to have another lousy rally." "The market's rally between Sept. 29 and Oct. 8 was one of the worst -- ever," said Frank D. Gretz, market analyst at Shields & Co., in a report. "The Dow rallied more than 400 points while the cumulative advance-decline line actually lost ground. The advance-decline line, or market breadth, may seem like just so much 'technical analysis,' but it's really about supply and demand. "When most stocks aren't going up, it's because the money isn't there. And, eventually, there isn't the money to push up even the remaining few." For all of Wall Street's uncertainty, one thing is certain in the coming week: Of any indicator besides the major market indexes, volume will be the most closely watched as a means of defining capitulation. cbs.marketwatch.com
