Friday, April 9, 2010
Sunday, February 8, 2009
Job losses chart
Here's a look at the job losses in the last three recessions, and the current one, courtesy of the House of Representatives. (I added the 1981-2 recession figures)
Note that numbers aren't corrected for size of economy or population. Each of the past three recessions had an "oh shit" moment where job losses pointed straight to hell, too. But if the current trajectory continues much longer, we're in big trouble.
Note that numbers aren't corrected for size of economy or population. Each of the past three recessions had an "oh shit" moment where job losses pointed straight to hell, too. But if the current trajectory continues much longer, we're in big trouble.
Friday, November 21, 2008
Stock Market at an 11-year low...anyone notice?
I'm surprised that the fact that the stock market—at least the S&P 500, a much better measure than the Dow—is now at an 11 year low after Thursday's plunge?
You'd think breaking below the 2002-2003 lows would cause a bit of ruckus. After all, the "five year lows!" headlines were omnipresent in October. Now that we're at the lowest point in the S&P 500 since mid-April 1997, I'm seeing little or nothing about it, except a few notes that "intraday lows touched levels not seen since 1997." I hate to break it to you, but the CLOSE was an 11 year low.
A search for "stock market" in Google News right now yields 254,000 hits. A search for "stock market 11-year low" yields 259. Less than 1 in 1,000 stories from yesterday reference this stunning fact.
Maybe it's because the Dow isn't quite there yet. Its 2002 low was a big lower that its current level. It's sad that the financial press and public still pays attention to such an unrepresentative kludge of a market index. Back in the heady late 90s when the Nasdaq is all many cared about I though that the Dow was on its way—properly—to becoming a relic, since the half of the public not tech-stock crazy was mad about index funds, specifically S&P500 index funds. As the public became more educated, I felt the Dow would become like the British House of Lords, there for pomp and circumstance but leaving the real power to the S&P 500, or even the Wilshire 5000.
But we still see "Dow down by XXX points" headlines with references to the percentage drop only later. We still see poor analysis of why the market fell, why it rose (in recent weeks, anyone who claims to truly know why the market did what it did on a certain day is crazy), and when a bottom will form.
I don't like sensationalism of the market in news stories. Except when you hit a decade low. Then that should be headline news.
You'd think breaking below the 2002-2003 lows would cause a bit of ruckus. After all, the "five year lows!" headlines were omnipresent in October. Now that we're at the lowest point in the S&P 500 since mid-April 1997, I'm seeing little or nothing about it, except a few notes that "intraday lows touched levels not seen since 1997." I hate to break it to you, but the CLOSE was an 11 year low.
A search for "stock market" in Google News right now yields 254,000 hits. A search for "stock market 11-year low" yields 259. Less than 1 in 1,000 stories from yesterday reference this stunning fact.
Maybe it's because the Dow isn't quite there yet. Its 2002 low was a big lower that its current level. It's sad that the financial press and public still pays attention to such an unrepresentative kludge of a market index. Back in the heady late 90s when the Nasdaq is all many cared about I though that the Dow was on its way—properly—to becoming a relic, since the half of the public not tech-stock crazy was mad about index funds, specifically S&P500 index funds. As the public became more educated, I felt the Dow would become like the British House of Lords, there for pomp and circumstance but leaving the real power to the S&P 500, or even the Wilshire 5000.
But we still see "Dow down by XXX points" headlines with references to the percentage drop only later. We still see poor analysis of why the market fell, why it rose (in recent weeks, anyone who claims to truly know why the market did what it did on a certain day is crazy), and when a bottom will form.
I don't like sensationalism of the market in news stories. Except when you hit a decade low. Then that should be headline news.
Tuesday, November 11, 2008
New York Times doesn't understand stock market, hedge funds
It's clear that the New York Times, or at least certain writers, don't understand much at all about how the stock market works, and even less about how hedge funds operate.
Hedge fund returns, on average, are down 20 percent. But one in every 50 funds is up more than 30 percent — an astonishing performance, considering the broad stock market is down even more than that.
Short selling is a basic stock market activity that every business writer should comprehend. And the fact that hedge funds might be up in a down market shouldn't be anything shocking. Perhaps nowadays, when we are used to hearing how every hedge fund uses the same basic strategy, it's unusual to hear about a contrarian fund. Actually it's quite refreshing. I would have to think that if I ran a hedge fund it would be up for the year.
My hedge fund's returns would approximately equal the return of a money market fund, but still, up for the year.
Hedge fund returns, on average, are down 20 percent. But one in every 50 funds is up more than 30 percent — an astonishing performance, considering the broad stock market is down even more than that.
Short selling is a basic stock market activity that every business writer should comprehend. And the fact that hedge funds might be up in a down market shouldn't be anything shocking. Perhaps nowadays, when we are used to hearing how every hedge fund uses the same basic strategy, it's unusual to hear about a contrarian fund. Actually it's quite refreshing. I would have to think that if I ran a hedge fund it would be up for the year.
My hedge fund's returns would approximately equal the return of a money market fund, but still, up for the year.
Friday, November 7, 2008
Jon Markman believes in the Double Top forecast!
Well what do you know...suddenly "mainstream" commentators are saying that the stock market might fall as much as 75% from peak, or at least pretty close.
Jon Markman's latest column suggests that Dow 4,000 (or lower) is possible if you do the math. His math doesn't involve measuring chart formations, or suggesting the S&P fall as much as NASDAQ did in the early 2000s (though he cites the latter as a comparison). His math involves taking corporate earnings through their expected scenario over the next few years.
He then says his scenario might be "too rosy." But of course, we know everyone gets over-pessimistic when imagining worst-case scenarios.
So I say, don't let these doom-and-gloomers get you down! The market is not going to fall 90% like in the great depression! Nor will it likely fall 80% like NASDAQ did in 2000-2. In all likelihood it will only decline a modest 75%. Don't give up hope!
And of course the S&P is the one to watch, not the ridiculous Dow. So he may be right about Dow 4000, though Dow 3500 would align more closely to S&P 500 of 400.
But the significant thing is, Markman is the first major columnist to go nuclear like this. He's depicting a doomsday scenario with credit card defaults, near double-digit unemployment, a year of negative growth, the whole works, and saying that this is what we should expect. And he's laying out the case calmly, not like some crazed blogger with his charts and graphs (ahem).
The common chorus recently was "we'll get through this" without saying what the "this" is. Only characters like Roubini—not widely known, and dismissed by the press—had been forecasting major doom and gloom, even as recent events fell upon us. Now Markman is basically joining him. Jim Jubak and others have mostly been saying things will be bad without giving details, and others (like Ben Stein) have been saying all along that nothing bad will happen.
Want to know when the crisis is over? Wait until Ben Stein throws in the towel and admits he was completely wrong, the sky really is falling! When he advises you to sell everything now, saying the country is dead and capitalism is destroyed...then you can buy confidently and clean up in the Great Recovery of the 2010s.
Jon Markman's latest column suggests that Dow 4,000 (or lower) is possible if you do the math. His math doesn't involve measuring chart formations, or suggesting the S&P fall as much as NASDAQ did in the early 2000s (though he cites the latter as a comparison). His math involves taking corporate earnings through their expected scenario over the next few years.
He then says his scenario might be "too rosy." But of course, we know everyone gets over-pessimistic when imagining worst-case scenarios.
So I say, don't let these doom-and-gloomers get you down! The market is not going to fall 90% like in the great depression! Nor will it likely fall 80% like NASDAQ did in 2000-2. In all likelihood it will only decline a modest 75%. Don't give up hope!
And of course the S&P is the one to watch, not the ridiculous Dow. So he may be right about Dow 4000, though Dow 3500 would align more closely to S&P 500 of 400.
But the significant thing is, Markman is the first major columnist to go nuclear like this. He's depicting a doomsday scenario with credit card defaults, near double-digit unemployment, a year of negative growth, the whole works, and saying that this is what we should expect. And he's laying out the case calmly, not like some crazed blogger with his charts and graphs (ahem).
The common chorus recently was "we'll get through this" without saying what the "this" is. Only characters like Roubini—not widely known, and dismissed by the press—had been forecasting major doom and gloom, even as recent events fell upon us. Now Markman is basically joining him. Jim Jubak and others have mostly been saying things will be bad without giving details, and others (like Ben Stein) have been saying all along that nothing bad will happen.
Want to know when the crisis is over? Wait until Ben Stein throws in the towel and admits he was completely wrong, the sky really is falling! When he advises you to sell everything now, saying the country is dead and capitalism is destroyed...then you can buy confidently and clean up in the Great Recovery of the 2010s.
Wednesday, October 29, 2008
Dow jumps 900 points. Why?
To be sure, I didn't see this one coming. The last big jump was obvious, imho, but this was out of the blue.
Some say Tuesday's expected rate cut was the catalyst. Hogwash. Rate cuts mean absolutely nothing right now. As I've said before: if a rate cut would help, what monumental incompetence has caused the Fed to wait until now to do it? Rates are already as low as they can possibly go, regardless of what the Fed's number says.
It certainly wasn't the news today. Housing prices have fallen 17% in the last year? Nope, probably not that one. Consumer confidence at an all-time low? Doubt it.
The market *can* climb a wall of worry, but that's not worry, that's hard data, and very negative.
The market gained in spite of the news. The news beat the market back from a 4% gain to near even, then, when no more horrible news was forthcoming, the market saw fit to advance about 9% in just two hours.
It was clear by the world market action that the market was going to jump. The question is, why did the world markets jump? If anything, they usually follow the lead of the U.S. markets, which would have suggested a further plunge. But the Nikkei soared, along with the Hang Seng, and Europe followed suit. So this time, the international markets pulled the U.S. markets up. Again, why?
Maybe it was just a case of "fallen too far, too fast, maybe it's going to turn around." That's what happened on the last 10% up day. Or maybe Volkswagen had something to do with it. It isn't every day that a company adds over $200 billion to its market cap. Normally the stocks of the major auto companies don't bounce around like penny stocks, but the last two days VW is reminding me of K-Tel from 1998. Back then, if you recall, K-Tel basically announced it was going to do something associated with the "World Wide Web." This was enough during those heady days to send it out of its normal $5 range to upwards of $80, for a brief time.
Volkswagon's announcement, or rather Porsche's announcement, was that it was going to buy more of VW until it owned a lot more of it. This made VW jump, somewhat due to that being a vote of confidence, but also because Porsche's buying was certain to juice the stock, and most importantly of all, the critical mass of people who had been shorting VW suddenly had to get out when not much stock was being traded. The classic "short squeeze" but on a monstrous level: for a short while Volkswagon was the world's most valuable company. I'd tell you what percent it went up each of the last two days but the story isn't straight, and the charts lie, so chaotic was the action in the car maker's stock.
Which just goes to show how irrational the markets are. When a company as huge as Volkswagon can triple in value almost overnight, something about our system for valuations is amiss. Not to mention that a $10 trillion dollar stock market can shed 9% in two days, then gain 10% the next. The markets don't always work seemlessly.
And we wonder why we can't figure out what our derivatives are worth.
Some say Tuesday's expected rate cut was the catalyst. Hogwash. Rate cuts mean absolutely nothing right now. As I've said before: if a rate cut would help, what monumental incompetence has caused the Fed to wait until now to do it? Rates are already as low as they can possibly go, regardless of what the Fed's number says.
It certainly wasn't the news today. Housing prices have fallen 17% in the last year? Nope, probably not that one. Consumer confidence at an all-time low? Doubt it.
The market *can* climb a wall of worry, but that's not worry, that's hard data, and very negative.
The market gained in spite of the news. The news beat the market back from a 4% gain to near even, then, when no more horrible news was forthcoming, the market saw fit to advance about 9% in just two hours.
It was clear by the world market action that the market was going to jump. The question is, why did the world markets jump? If anything, they usually follow the lead of the U.S. markets, which would have suggested a further plunge. But the Nikkei soared, along with the Hang Seng, and Europe followed suit. So this time, the international markets pulled the U.S. markets up. Again, why?
Maybe it was just a case of "fallen too far, too fast, maybe it's going to turn around." That's what happened on the last 10% up day. Or maybe Volkswagen had something to do with it. It isn't every day that a company adds over $200 billion to its market cap. Normally the stocks of the major auto companies don't bounce around like penny stocks, but the last two days VW is reminding me of K-Tel from 1998. Back then, if you recall, K-Tel basically announced it was going to do something associated with the "World Wide Web." This was enough during those heady days to send it out of its normal $5 range to upwards of $80, for a brief time.
Volkswagon's announcement, or rather Porsche's announcement, was that it was going to buy more of VW until it owned a lot more of it. This made VW jump, somewhat due to that being a vote of confidence, but also because Porsche's buying was certain to juice the stock, and most importantly of all, the critical mass of people who had been shorting VW suddenly had to get out when not much stock was being traded. The classic "short squeeze" but on a monstrous level: for a short while Volkswagon was the world's most valuable company. I'd tell you what percent it went up each of the last two days but the story isn't straight, and the charts lie, so chaotic was the action in the car maker's stock.
Which just goes to show how irrational the markets are. When a company as huge as Volkswagon can triple in value almost overnight, something about our system for valuations is amiss. Not to mention that a $10 trillion dollar stock market can shed 9% in two days, then gain 10% the next. The markets don't always work seemlessly.
And we wonder why we can't figure out what our derivatives are worth.
Monday, October 27, 2008
Ben Stein, the anti-Chicken Little
Ah, Ben Stein, always good for a chuckle. Here he defends himself against those who are irate that he didn't foretell the Wall Street meltdown.
Ever the skilled propagandist, Stein changes the question to suit his needs. The question should have been "why did you reassure us that nothing was wrong?" Stein didn't just fail to foresee the distaster—he actively denied that anything was wrong or that anything bad could possibly be in the cards. And he was dismissive to any arguments on the other side, arguments that turned out to be completely correct. With his know-it-all air, which he earned by portraying an intelligent person in various tv/movie roles, Stein told us how it was: there is nothing to worry about; go back to sleep.
His excuse, which I accurately predicted he'd have rather than fessing up to cluelessness, was that by not bailing out Lehman Brothers, the Fed caused the disaster. Without that mistake, everything would have been okay. In other words, the major government intervention that was already happening didn't go far enough to save the free market from itself. Coming from an almost reactionary laissez-faire conservative, that is just rich.
So since nobody could have foreseen it, Stein takes himself off the hook. Unbelievable. Even Alan Greenspan admitted he was "partially wrong" the other day.
It's one thing to not see the sky is falling; it's another to deny that it might ever fall. Stein did the latter, and once again showed why he is the worst pseudo-economist the major media keeps (inexplicably) trotting out to keep the unwashed masses in line and apart from the deservedly rich.
Ever the skilled propagandist, Stein changes the question to suit his needs. The question should have been "why did you reassure us that nothing was wrong?" Stein didn't just fail to foresee the distaster—he actively denied that anything was wrong or that anything bad could possibly be in the cards. And he was dismissive to any arguments on the other side, arguments that turned out to be completely correct. With his know-it-all air, which he earned by portraying an intelligent person in various tv/movie roles, Stein told us how it was: there is nothing to worry about; go back to sleep.
His excuse, which I accurately predicted he'd have rather than fessing up to cluelessness, was that by not bailing out Lehman Brothers, the Fed caused the disaster. Without that mistake, everything would have been okay. In other words, the major government intervention that was already happening didn't go far enough to save the free market from itself. Coming from an almost reactionary laissez-faire conservative, that is just rich.
So since nobody could have foreseen it, Stein takes himself off the hook. Unbelievable. Even Alan Greenspan admitted he was "partially wrong" the other day.
It's one thing to not see the sky is falling; it's another to deny that it might ever fall. Stein did the latter, and once again showed why he is the worst pseudo-economist the major media keeps (inexplicably) trotting out to keep the unwashed masses in line and apart from the deservedly rich.
Thursday, October 23, 2008
Good news: S&P 500 to fall 80%!!!
Helene Meisler has some good news for stock market watchers who are concerned about the future: the market is going to fall 80% from its peak!
Oh, you think that doesn't sound like good news? Well, as Meisler states in a recent article, people have overreacted to the recent churning markets. While the volatility has spooked many, Meisler recalls similar volatility in the 2000 downturn.
At the time Nasdaq was a much larger chunk of the market, over 1/3 of the total market cap. But it still didn't set the course for the entire market. The S&P 500 didn't experience volatility close to what Nasdaq did at the time. And there was no real economic crisis occuring back then other than the Nasdaq's meltdown. The rest of the economy was sound, if lurching toward a mild recession.
Now, however, it's the entire stock market that's churning the way Nasdaq vacillated at the turn of the millenium. That's why people are freaking out today, not to mention the entire financial system freezing up. Believe me, the vast majority of people watching the market today remember exactly what happened in 2000. But Meisler doesn't seem to recall what happened over the next few years.
For while she speaks of the comparison—between today's market and 2000's Nasdaq—she doesn't follow it through to its logical conclusion. She says that there may be a short-term trading play to take advantage of when the market props up over the next few months, with which I agree. But what she should be talking about is the fact that Nasdaq fell over 80% from its peak to its 2003 low.
If today's S&P 500 resembles 2000's Nasdaq, we may see the S&P 500 at 320 again.
Now, if you've read this site's thesis, you know that's even worse than the 75% decline projected by the Massive Double Top for which this blog is so eloquently named.
Therefore, far from giving market watchers a much-needed reality check that the sky isn't falling, she unwittingly has provided excellent corroborating evidence that the sky, indeed, is going to fall. At least 4/5th of the way.
It's remarkable that this projection complements the technical analysis so well. The market action is actually confirming the prediction of the chart formation. So it might be a good idea to follow up on her short-term prediction. If the total market follows the path taken by the 2000 Nasdaq in the short term, it's even more likely to follow it in the longer term. Human nature (and economic cascading) remaining the same over the last several years, I see no reason we shouldn't consider that the same result may occur.
If there's anything to be rosy about, it's the possibility for one hell of a buying opportunity. Not now, but in a year or more, when the S&P 500 sits at 400, or 350, or wherever it lands. There will be money on the floor, waiting to be scooped up, like they said about 73-74, and 1933. And yes, about 2003 as well.
Meisler writes, "Everyone says things are more sped up now for some reason. I don't know about you, but it looked pretty sped up to me in the spring of 2000."
It was, though nothing like today. And in the next few years, the pedal might really be pushed to the metal.
Oh, you think that doesn't sound like good news? Well, as Meisler states in a recent article, people have overreacted to the recent churning markets. While the volatility has spooked many, Meisler recalls similar volatility in the 2000 downturn.
I had this recollection that the moves we saw after the tech bubble burst in 2000 were just as wild as we have seen now. Yet no one was discussing this.Wait, I remember that downturn well. And I do *not* recall similar volatility. What is she talking about?
In early April 2000, Nasdaq actually lost -- get this --27% in five trading days.Ah, I see. Nasdaq experienced similar volatility. Yes, I do remember this. And it's exactly why "no one is discussing" it, because it's not nearly the same thing.
At the time Nasdaq was a much larger chunk of the market, over 1/3 of the total market cap. But it still didn't set the course for the entire market. The S&P 500 didn't experience volatility close to what Nasdaq did at the time. And there was no real economic crisis occuring back then other than the Nasdaq's meltdown. The rest of the economy was sound, if lurching toward a mild recession.
Now, however, it's the entire stock market that's churning the way Nasdaq vacillated at the turn of the millenium. That's why people are freaking out today, not to mention the entire financial system freezing up. Believe me, the vast majority of people watching the market today remember exactly what happened in 2000. But Meisler doesn't seem to recall what happened over the next few years.
For while she speaks of the comparison—between today's market and 2000's Nasdaq—she doesn't follow it through to its logical conclusion. She says that there may be a short-term trading play to take advantage of when the market props up over the next few months, with which I agree. But what she should be talking about is the fact that Nasdaq fell over 80% from its peak to its 2003 low.
If today's S&P 500 resembles 2000's Nasdaq, we may see the S&P 500 at 320 again.
Now, if you've read this site's thesis, you know that's even worse than the 75% decline projected by the Massive Double Top for which this blog is so eloquently named.
Therefore, far from giving market watchers a much-needed reality check that the sky isn't falling, she unwittingly has provided excellent corroborating evidence that the sky, indeed, is going to fall. At least 4/5th of the way.
It's remarkable that this projection complements the technical analysis so well. The market action is actually confirming the prediction of the chart formation. So it might be a good idea to follow up on her short-term prediction. If the total market follows the path taken by the 2000 Nasdaq in the short term, it's even more likely to follow it in the longer term. Human nature (and economic cascading) remaining the same over the last several years, I see no reason we shouldn't consider that the same result may occur.
If there's anything to be rosy about, it's the possibility for one hell of a buying opportunity. Not now, but in a year or more, when the S&P 500 sits at 400, or 350, or wherever it lands. There will be money on the floor, waiting to be scooped up, like they said about 73-74, and 1933. And yes, about 2003 as well.
Meisler writes, "Everyone says things are more sped up now for some reason. I don't know about you, but it looked pretty sped up to me in the spring of 2000."
It was, though nothing like today. And in the next few years, the pedal might really be pushed to the metal.
Tuesday, October 14, 2008
Well I was right, but not right enough! My estimate of a 6.5% gain, which would have been one of the biggest in the last several decades, was far too conservative. Instead the S&P 500 jumped well over 10%. I had figured the jump would be from 5-10%, with 10% a possibility but not that likely, and surpassing it? Not a chance, right? The coordinated action by Europe as well as the Morgan Stanley deal really juiced the market on Monday. Even without it, the market was due for an upside explosion. With it, the surge became the biggest one-day jump in almost 70 years.
Today's action isn't unexpected either. Two conflicting factors were at play. 1) Follow-thru from yesterday's surge, and 2) profit-taking from yesterday's surge. We are almost certainly at a temporary market bottom. The direction from here is up, for at least a few months. But I don't think it lasts much longer than the end of the year, and indeed we may drift back to test the lows by then even.
So today jumped 4% and settled back to par, thus satisfying both factors, followthru and profit-taking. Overall I think this week should continue upward though, with people putting money back into stocks in their 401K that they moved out fearing a crash on Monday or heeding Jim Cramer's call sometime last week. Those that heard him on Monday and moved immediately into cash for Tuesday, then moved back into cash Monday (so they were back into the market today) probably broke even. But I'm sure many more waited and watched the rest of the week before deciding on Friday to move to cash, thus taking all the hit while missing yesterday's surge.
That's the problem with listening to gurus: people inevitably want to wait a while to digest their recommendation to see if it's coming true before acting, so even if the guru is right the waiting kills you. And if he's wrong you get killed anyway.
Today's action isn't unexpected either. Two conflicting factors were at play. 1) Follow-thru from yesterday's surge, and 2) profit-taking from yesterday's surge. We are almost certainly at a temporary market bottom. The direction from here is up, for at least a few months. But I don't think it lasts much longer than the end of the year, and indeed we may drift back to test the lows by then even.
So today jumped 4% and settled back to par, thus satisfying both factors, followthru and profit-taking. Overall I think this week should continue upward though, with people putting money back into stocks in their 401K that they moved out fearing a crash on Monday or heeding Jim Cramer's call sometime last week. Those that heard him on Monday and moved immediately into cash for Tuesday, then moved back into cash Monday (so they were back into the market today) probably broke even. But I'm sure many more waited and watched the rest of the week before deciding on Friday to move to cash, thus taking all the hit while missing yesterday's surge.
That's the problem with listening to gurus: people inevitably want to wait a while to digest their recommendation to see if it's coming true before acting, so even if the guru is right the waiting kills you. And if he's wrong you get killed anyway.
Sunday, October 12, 2008
Monday: Market crash, or up 6.5%?
After Wall Street's worst week ever (by some measures), people wondered: is this the lead-up to another Black Monday (a la 1987)?
I don't think so. In fact I think the proper analogue is the week after the September 11 attacks. That week the market was down each day. Friday was a meandering day that ended down a bit. The week as a whole was -11%, compared to this week's -18%. The next Monday was up 4%, which is why I see +6.5% for this Monday.
The week before the 1987 crash was up on Tuesday, then down Wednesday, Thursday, and Friday. Friday was down 5% (the first ever day that the Dow fell 100 points, which made it big news that everyone—market watcher or not—heard over the weekend). This isn't the same type of week. This latest week was a lot like the post-September 11 week when people wondered if the world was going to be the same.
Turns out the world didn't change all that much except at airport security. Just like, our lives will be pretty similar to how they were last month except on Wall Street. Last week was an overreaction, so Monday should be a bottled up bullish day, the first up day in about 8 sessions. That's a long time.
Now when I say the downside slide was an overreaction, I'm using trader speak. In other words, for those who are perennially bullish, it was an overreaction. Perma-bulls even got freaked out, and this week they'll come back to their senses and be bullish again. When they buy instead of sell Monday, the market will rise.
Given the recession that we face and how little it has been discussed, the correction isn't even nearly over in the longer run in my opinion. But even I was surprised at how fast we almost got to the neckline of the double top. And the correction is well over 40% now, and like I said, very ripe for an upward reaction. At this point it's hard to think of news that could shock people, and the IMF and dozens of countries are getting plans together to deal with the crises this weekend, so the push looks to be in the up direction. At least for one day. :)
But probably Tuesday will follow through, and as I wrote before, the next weeks or months will drift in the positive direction. Any small investors/IRA holders who sold due to Jim Cramer have acted by now.
Friday's market action was pretty wild, both in range and the fact that it basically crashed and recovered twice. That's a lot of selling, done twice in the same day, and lots of buying too. It may seems odd to determine that both are positive but in this case I think so. We're seeing the lows that buyers (or computer trading programs) are willing to buy into, as well as washing out the final sellers in this phase. And most pros and market watchers will be certain that we've reached the lows since the drop is comparable to the 1973-74 bear market and the 2000-2002 bear market.
So enjoy Monday. And if Monday goes bad, count on Tuesday. If both are bad, I'm not sure what to tell you.
I don't think so. In fact I think the proper analogue is the week after the September 11 attacks. That week the market was down each day. Friday was a meandering day that ended down a bit. The week as a whole was -11%, compared to this week's -18%. The next Monday was up 4%, which is why I see +6.5% for this Monday.
The week before the 1987 crash was up on Tuesday, then down Wednesday, Thursday, and Friday. Friday was down 5% (the first ever day that the Dow fell 100 points, which made it big news that everyone—market watcher or not—heard over the weekend). This isn't the same type of week. This latest week was a lot like the post-September 11 week when people wondered if the world was going to be the same.
Turns out the world didn't change all that much except at airport security. Just like, our lives will be pretty similar to how they were last month except on Wall Street. Last week was an overreaction, so Monday should be a bottled up bullish day, the first up day in about 8 sessions. That's a long time.
Now when I say the downside slide was an overreaction, I'm using trader speak. In other words, for those who are perennially bullish, it was an overreaction. Perma-bulls even got freaked out, and this week they'll come back to their senses and be bullish again. When they buy instead of sell Monday, the market will rise.
Given the recession that we face and how little it has been discussed, the correction isn't even nearly over in the longer run in my opinion. But even I was surprised at how fast we almost got to the neckline of the double top. And the correction is well over 40% now, and like I said, very ripe for an upward reaction. At this point it's hard to think of news that could shock people, and the IMF and dozens of countries are getting plans together to deal with the crises this weekend, so the push looks to be in the up direction. At least for one day. :)
But probably Tuesday will follow through, and as I wrote before, the next weeks or months will drift in the positive direction. Any small investors/IRA holders who sold due to Jim Cramer have acted by now.
Friday's market action was pretty wild, both in range and the fact that it basically crashed and recovered twice. That's a lot of selling, done twice in the same day, and lots of buying too. It may seems odd to determine that both are positive but in this case I think so. We're seeing the lows that buyers (or computer trading programs) are willing to buy into, as well as washing out the final sellers in this phase. And most pros and market watchers will be certain that we've reached the lows since the drop is comparable to the 1973-74 bear market and the 2000-2002 bear market.
So enjoy Monday. And if Monday goes bad, count on Tuesday. If both are bad, I'm not sure what to tell you.
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