Richard Russell
Want to know what's going on? Read the newspapers
March 27, 2003
"US Dispatches 30,000 extra troops."
"Propaganda Blow For Pentagon After Deaths in Baghdad."
"Allies Admit Predicament as Basra 'Uprising" Evaporates."
"German Companies Fear Missing Out on Postwar Orders."
"Paris Plans to Regain Place on World Stage."
"Riyadh Warns Long War May Damage Ties."
Prolonged War Could Trip the World Into Recession, International Monetary Fund Warns."'
"New Home Sales in US in Fastest Fall in 20 Years."
"Republican Hopes of Rescuing Tax Cut Program Dwindle."
"US Looks Over Its Shoulder at North Korea."
"Durable Goods Orders, Home Sales Disappoint."
All the above are from today's newspapers (I read 12 newspapers a day). And what does the above tell us about the markets? Very damn little. Why? Because we never know how much good news or bad news the markets have already discounted.
For a fix on the markets, we have to turn to the markets themselves. The stochastics for the major averages have all turned down. But let's zero in on the one stock average that the whole world watches -- the D-J Industrial Average.
Here too the stochastics have turned down. The question is how much damage may be done before the market and the Dow become oversold?
The declining 200-day moving average of the Dow today stands at a new bear market low of 8412. The faster-moving and declining 50-day MA of the Dow stands today at 8023. The spread between the two moving averages is at its widest yet -- 389. I'm guessing that we're nearing the end of the widening spread, but that's just a guess.
I wrote a few days ago that it's important for the Dow to hold ABOVE its 50-day MA, which as I said now stands at 8023. If the Dow closes below its declining 50-day MA, that would constitute a "sell signal" and even a "short-sell" signal. Conversely, if the market can become oversold with the Dow remaining above its 50-day MA, that would be impressive.
Again, I'll repeat that from the bear's standpoint, there are two main downside targets. The first is the recent March 11 closing Dow low of 7524.06. Under that stands the bear market low of Dow 7286.27.
It's also well to watch the action of the D-J Transportation Average which, so far, has been holding better than the Dow.
Periodically, I find it interesting to go through all thirty D-J Industrial stocks and grade each stock according to its position as bullish, neutral or bearish -- based on the moving averages.
Here's what I found. The following Dow stocks are still bullish. C, CAT, DIS, IBM, INTC, JNJ, MMM, MRK, PG, WMT, XOM. That's eleven Dow stocks, actually more than I would have expected.
These stocks are neutral in that they are situated between their two moving averages. DD, GE, HD, HON, HPQ, JNJ, MCD, MSFT. That's eight Dow stocks, all wondering which way to break.
The following Dow stocks are in clearly bearish trends. AA, AXP, BA, EK, GM IP, KO, MO, SBC, T, UTX.
So interestingly, we have a technical stand-off in the Dow at this time -- eleven stocks bullish, eleven stocks bearish, eight stocks "undecided."
TODAY'S MARKET ACTION -- Surprise -- my PTI was unchanged at 5248 with the moving average at 5231. PTI remains in its bull mode.
After being down over 100, the Dow closed down 28.43 at 8201.45. No movers in the Dow today.
April crude was up 1.74 to 30.37.
Transports were down 20.83 to 2183.05.
Utilities were up 1.40 to 208.92.
There were 1812 advances and 1453 declines. Down volume was only 52% of up + down volume, indicating great resistance to the downside.
There were 38 new highs and 37 new lows. My High-Low Index was up 1 to minus 8868.
Total NYSE volume was 1.21 billion shares.
S&P w as down 1.44 to 868.52.
Nasdaq was down 3.20 to 1384.25 on 1.40 billion shares.
My Big Money Breadth Index was up 2 to 679.
June Dollar Index was up .06 to 101.13. June euro was up .03 to 106.55. June yen was up .03 to 83.54.
German DAX was up 14.72. June Nikkei was down 70 to 8290.
Bonds were up slightly -- June 30 year T-bond was up 4 ticks to 111.11 to yield 4.93%. June 10 year T-note was up 6 ticks to 113.29 to yield 3.92%.
April gold was down 1.70 to 328.40. May silver was down .05 to 4.39. April platinum was down .40 to 633.90. June palladium was up 2.35 to 197.65.
Gold/Dollar Index was down 1.80 to 324.80.
Gold advance-decline line was down .12 to 1047.
XAU down 1.70 to a new low of 62.21. HUI down 2.64 to 114.26.
AEM down .23, ASA down .80, DROOY down .06, GLG down .16, HMY down .25, NEM down .51, RGLD down .34.
Gold and gold shares declining in the face of massive incoming debts and deficits. Illogical, but it's happening. Real money declining vs. paper -- weird but it's happening. Manipulation? Maybe, but if so, it's an act of desperation.
STOCKS -- My Most Active Stock Index was up 1 to 118.
The 15 most active stocks on the NYSE were -- AOL up .09, GE down .21, PFE up .10, EMC up .08, S down .33, HI up .16, RRI up .20, C down .08, SBC down .64, NT down .03, WDC up .71, XOM, DIS down .03, GLW up .02, MOT down .15.
Few more -- GM down .12, DCX down .21, WMT up .21, TGT down .39, JCP down .34, KSS down .46, LEN up . ED down .29, SO down .11, KSE down .43, AIG down 1.06, FNM up .46, MSFT down .21, MER down ..48, GD down .47. Not much movement anywhere.
VIX was down .01 to 32.15 and not much movement here either, but no fear being shown.
McClellan Oscillator down slightly at plus 78.
CONCLUSION -- Market today very resistant to decline. Who says so? My PTI says so with a zero change. Stochastics still high in overbought territory and just beginning to turn down.
Lowry's Selling Pressure coming down fast now, and Buying Power rising. Those holding stocks now show little inclination to sell.
Bush now hedging his bets on Iraq, saying victory could take weeks, even months. If it's a victory in a week or so, he's a hero. If it takes longer, he told you so. But if it drags out to a few months, sentiment will change, and not for the better. Any way you look at it, the expenses during the war and after will be massive. A long and bitter war could throw the whole world into recession.
US consumers now cutting back on their buying, mostly of necessity. Every business person I talk to tells me "It's slow." Yet the stock market declines only grudgingly. Fascinating, what could be going on? Will anything turn Americans bearish?
See you tomorrow --
Russell
From the March 26 Christian Science Monitor -- "Washington:; The US military is on the verge of attempting something unprecedented in modern warfare: seizure of a sprawling capital without incurring heavy casualties and without wholesale destruction of the city itself."
Russell Comment -- Maybe it can be done. Me, I'm prejudiced by WW II experiences. In the battle for Anzio, in the first four days the Allies took 10,000 casualties. Can we take Baghdad with just a few casualties.? Guess we'll find out.
After the War -- Iraq is going to be a mess by the time this war is over. The population of Iraq is going to need food, water, medicine, rebuilding, just about everything.
Already, corporations are drooling at the chance to land contracts to "help" Iraq. The UN Development Program estimates that it will cost $30 billion over the next three years to revive Iraq. Other estimates are at $100 billion in an effort comparable to rebuilding Europe after WW II. Russell Comment -- as usual, the high estimates will prove to be too low.
Could the rebuilding of Iraq be one thing that the markets are looking at? Already, Wall Street is trying to figure out who'll be the big winners. Sure shots -- Halliburton, Schlumberger. One thing is sure -- Iraq after the war will be one of the biggest targets for US capital. Is this a great war or what!
Show Biz -- The movie box office is down 31% from where it was last year. But that's OK, says Hollywood, just wait 'til the war's over.
Meanwhile Celine Dion with a three-year $45 million contract opens her big new show at Caesars Palace in Vegas. The NY Times and the LA Times were not enthusiastic, and USA Today gave it two stars out of four. USA Today called it "an epic waste of money, talent and energy."
As for the Academy Awards, it had the smallest audience since 1974. Just wait 'til the war's over. (and yes, I read Variety).
Fashion -- Is the billion dollar US teen-ager business taking over the fashion world? Britney Spears bares her waist and teen-agers all over America do the same. But what's this? Women adopt a teen-age fashion? Now America's women are baring their waists. When's the last time a teen-age fashion made it to Vogue and Harpers Bazaar and "W"?
A subscriber writes that he thinks that I shouldn't even suggest short-term trading in either bull or bear markets, since in his experience very few people ever make money via short-term trading in the market. Furthermore, this subscriber is of the opinion that I shouldn't encourage my subscribers to indulge in short-term trading, because it may become an expensive habit.
I don't encourage subscribers to trade for the short-term or for quick profits. However, I have many subscribers who are going to trade whether I encourage them to or whether I don't. Occasionally I believe the market is in a position where a trade might be warranted, but I always warn people that trading is a risky business, and the essence of investing is risk management. If you want to trade, I suggest doing it with money you can risk, and that means always having an actual or a mental stop-loss in place.
Trading, if nothing else makes for good discipline. Personally, I very seldom trade. For one thing, having a position gives me a bias, and when you write an advisory report you should be free of biases. Biases often turn into hopes, and in this business when you find yourself hoping you are probably on the way to losing money (see my piece on HOPE listed on the home page.
Risk management in this business entails be willing to take small losses. If you're not willing to put stop losses under your positions and if you're not able to say "OK, I was wrong, SELL -- I'm out of here !), if you're not able to do that -- then don't even think of short-term trading. |
