Bill Meehan's last piece (god bless him and his family)
It Could Be Worse (tzu posted on another thread)
By Bill Meehan
Special to TheStreet.com
09/10/2001 10:06 AM EDT
That's about as upbeat as I can get in the dark of morning here in Gotham. While it was another glorious weekend, perfect for the U.S. Open finals and pigskin kickoffs, the forecast on the Street of Dreams is about as bad as it gets.
It could be worse though. It could be like Japan, where the Nikkei is toying with the 10,000 level, were it not for President Bush's "valiant" call to get a confab of Washington's best and brightest to figger out just what's gone wrong in the dang post-Clinton New Economy. Stay tuned for exciting details and wacky Congressional proposals all but destined to send the global economy into a death spiral.
It could be worse on the employment front too. Heck, the services side of the economy could be shedding jobs as fast as the manufacturing side instead of just stalling with a decided downward trend. Yes, and unemployment could have reached the Fed's year-end estimate of 5% rather than the 4.9% rate reported on Friday with a full quarter to go. And, aren't you comforted that the economy isn't in, and isn't expected to fall into a recession -- at least according to the current but likely to be further revised gubmint stats and an overwhelming consensus of economists? After all, we all know just how accurate those dismal scientists are at putting a finger on the economy's pulse. Now, that's a relief. Not!
The folks at Intel (INTC:Nasdaq - news - commentary - research) say the company will make its recent revenue guidance this quarter, and that things will improve (insert parrot here, and not one of the Monty Python variety). So who's to be overly concerned with Friday's report by International Data Corp. forecasting PC unit sales will actually be down in 2001 for the first time since 1985?
Heck, it could be a lot worse; the Luddite Party hasn't a chance in the mid-term elections and Easy Al is still at the helm. At least the threat of an intermeeting rate cut kept some of the shorts at bay, as the market suffered another dismal week.
Surely there's a silver lining in the fact that the already crashed Nasdaq held up much better than the Old Economy stocks on Friday. But, on second thought, it seems more likely that the old Dow Industrial and Transport averages are apt to play catch-up to yesterday's highfliers and fallen angels. After all, warnings season is never far behind the NFL kickoff and it's usually a time for good news from Corporate America, right? Oh, yeah! And the fiscal year-end for swarms of mutual funds isn't likely to be accompanied by massive tax-loss selling. They're in it for the long haul so down 50% or less is hardly a reason to be concerned about redemptions. Right you are matey! Steady as she goes.
As for sentiment, there's no longer a sentient being unaware of the historic levels in the Arms Index so I'll spare you the gruesome numbers. So there's a plethora of technicians calling for at least a snappy countertrend rally -- yours truly included unfortunately. Charges of getting too cute have been tossed at some of the few remaining bears. As I see it, even if the market manages to turn around from what looks to be another dismal open, I'm guilty as charged. Unfortunately, the CBOE put/call ratio fell to "only" .83, when a reading above 1 would have been much preferred to demonstrate a healthier bout of towel-throwing. Well, at least the bond ghouls went home happy; always a good sign to see interest rates falling, no? Well, not exactly. The bond market is draining liquidity from the stock market, as last week's equity fund outflows were about equal to the inflows into muni funds.
And lastly, speaking of sentiment, Barron's reported a study in southern Florida that showed 23% of the brokers in the Sunshine State suffer from depression compared to 7% of the overall population.
Could be much worse and it looks as if it will, as my own less-than-scientific survey of brokers shows that lack of commissions resulted in a 50% rate of depression, with most already seeing a shrink twice per week. (If that's not a positive sign for the health care and pharmaceutical industries then I don't know what is, even though most of the "defensive" names are grossly overvalued relative to their modest growth rates.) Let's hope this afternoon's consumer credit report doesn't show that a nation of spendthrifts are reconsidering their approach to spending, lest a death blow be delivered to the global economy.
Were it not for the fact that rarely have so few been able to find something good to say (market technicians zeroing in on the Arms numbers excluded), I'd be very, very concerned about a meltdown myself.
So, it could be worse; and it probably will be before a meaningful bottom is found.
However, there appears to be a significant shift going on in the market, one I believe is tradable on a very short-term basis. With the Arms readings much higher on the Nasdaq and Amex, we are apt to see the tech sector outperform the broader market measures for at least several days. As we suggested last week, shorting S&P 500 SPDRS (SPY:AMEX - news - commentary - research) (or Dow Diamonds (DIA:AMEX - news - commentary - research) vs. long Nasdaq 100 Tracking Stock (QQQ:AMEX - news - commentary - research) ) worked very well on Friday and still looks like the way to go now. That said, over the intermediate-term, the downside on the Comp still looks much greater than it does for the broad market.
My target of 1357 still stands, but I fear my 1000 target on the S&P 500 Index might be a bit too optimistic. The financials are in a tailspin, as are the retailers, with worries about how much consumers will spend in the fourth quarter mounting. But, it could be worse. The Fed could unleash a "surprise" rate cut before next month's Open Market Committee meeting and the market would likely rally on the news. However, lower short-term rates won't be a panacea and the next decent bounce, regardless of the reason (and especially if the trigger is a rate cut), should be viewed as just another rally attempt to be sold.
Fasten your seatbelts and look for better volume; the worst is yet to come. |
