The Weight
By Jeff Cooper
September 16, 2000 11:30 AM EST
I pulled into Nazareth, was feelin' about half past dead;
I just need some place where I can lay my head.
"Hey, mister, can you tell me where a man might find a bed?
He just grinned and shook my hand, and "No!" was all he said.
Take a load off Fanny, take a load for free;
Take a load off Fanny, And (and) (and) you can put the load right on me.
I picked up my bag, I went lookin' for a place to hide;
When I saw Carmen and the Devil walkin' side by side.
I said, "Hey, Carmen, come on, let's go downtown."
She said, "I gotta go, but m'friend can stick around.
(Chorus)
Go down, Miss Moses, there's nothin' you can say
It's just ol' Luke and Luke's waitin' on the Judgement Day.
"Well, Luke, my friend, what about young Anna Lee?"
He said, "Do me a favor, son, woncha stay an' keep Anna Lee company?"
(Chorus)
Crazy Chester followed me, and he caught me in the fog.
He said, "I will fix your rack, if you'll take Jack, my dog."
I said, "Wait a minute, Chester, you know I'm a peaceful man."
He said, "That's okay, boy, won't you feed him when you can."
(Chorus)
Catch a cannon ball now, t'take me down the line
My bag is sinkin' low and I do believe it's time.
To get back to Miss Fanny, you know she's the only one.
Who sent me here with her regards to everyone.
(Chorus)
From "Music from Big Pink"
Words by J.R. Robinson
Performed by The Band
Haven't we been here before? It seems like we've been here for a long time. Since the most venerated of the indices, the Dow, hit 11,000 nearly 18 months ago, a persistent weight has kept the Dow anchored in a wide and loose trading range. While the Dow/S&P remained boxed in, the Nasdaq 100 (NDX), the lair of the golden bulls of the new-era cult, snorted up a 140%-plus stampede--that is, until the weight of profit-taking tripped up the parabola this spring.
There are a lot of things you can do on a spike, but you can't sit on them. Spikes don't need a reason to collapse, they fall of their own weight. So despite the input of the federal reserve that has pumped up the money supply at a 10% annual rate in the last few months, fueling the economy and flooding the excess over into financial instruments, the equity markets did not continue their summer jaunt. Despite margin debt surging back to the levels of last spring, most of the major indices remained not only substantially below prior highs, but are flirting with breaks of important support. While the opium of the Street--easy cash--spiked with the conventional wisdom that the market always rallies into an election, instead of a rally, the market appears to have OD'd on the August momentum.
The herd mentality never ceases to amaze me. Money managers continue to smoke the same thing. And they continue to chase the same cast of characters, despite the same stratospheric valuations and the lessons of last spring.
Don't bogart that joint, my friend
It seems everybody got in the water before Labor Day because the cheerleaders headbutted us with songs about how the market had to explode now that the soft landing scenario was a fait accompli, now that lower rates were supposedly just around the corner. These are the same cheerleaders who complacently assured us that oil was on its way back to $20 a barrel. These are the same cheerleaders who ignored a major downgrade of Japanese debt and a currency collapse in Europe. These are the same cast of characters, the same stooges and pundits, who extrapolated a strong economy into the hereafter but are now caught in a fog of anxiety over earnings warnings and an economic slowdown that may be more than just a slowdown. The arrogance of high people in high places with lots of other people's money never ceases to amaze me.
About the only indices that performed well this week were energy related. And those are often contra-market indices. Prices for most all other sectors slid either on the oil slick or on currency translation concerns -- or earnings concerns.
Maybe it's just September, which has a way of taking bad news like a cannonball in the gut, and ignoring good news. But a survey on NBC's Dateline showed that a majority of investors not only sees 15% returns in the stock market as doable, but consider them a given.
Moreover, with the AAII (American Association of Individual Investors) sentiment readings showing only 8% bears, the lowest reading in history, and with investor's intelligence surveys showing newsletter writers back to 50% bulls, is it any wonder that this week showed continued pressure in the stock market? As I said before, just about everybody that wants in the water is already in the water. Investors are just plain full of inventory and it's pulling them under. Despite many bull technicians pointing to oversold conditions going into the week, the rallies were short lived, very short lived. It's just plain heavy out there.
A study of market history prompted me to caution you in this column last week that the Nasdaq comp was flirting with a cascade pattern. Moreover, I also mentioned that the hair on my neck stands up when the market reverses strongly after a 90 to 100-day rally, particularly into the end of August, which has an inclination for important market turns. Adding to the technical trouble, currency disintermediation is roiling the world. And when SUVs roll off the showroom floor despite 36-dollar crude oil and Saddam Hussein, who hasn't entertained a U.N. inspector in years, starts to buzz his neighbors with jets, the hair on the back of my neck stands up even further.
Every decline this decade has been greeted with new highs no later than four months after the lows. And September is four months after our lows. So you see last week when I said the market was at a crossroads, I meant it. Contrary to popular belief, the market does not spend much time in a crossroads. Fifteen percent to 20% of the time, it's in a strong uptrend, 15-20% of the time it's in a strong downtrend, and the rest of the time it goes sideways. So next week is critical. The Nasdaq is testing a trendline off the May and August lows and is in the process of testing the high of the signal bar at the August 3 low. Any further decline would impair a four-month base-building process. So let's see what we have going into next week.
On Tuesday, the five-day total for the closing Nasdaq trend reached the highest reading of the year at 6.83. Moreover, the five-day Nasdaq trend has been above 6 for over three consecutive sessions now, usually the sign of a short-term low. Because of the severe oversold condition and the way many Nasdaq stocks held in the last two hours on Friday despite continued downside pressure in the Dow/S&P. A rally could commence at any time. Moreover, there's also the potential for a bottoming pattern--a low September 13, surrounded by two higher lows. If Thursday's high at 3985 on the Nasdaq Composite is succeeded on a closing basis, that would be a confirmed buy signal. If that occurs, a two-period rally on the weekly chart could ensue. The nature of any rally, should it occur, and the subsequent behavior of the market going into October will be very important for the health of the market going into year-end. Continue to play both sides. Continue to play it day-by-day, stock-by-stock, and one-by-one.
And be careful out there. |
