Grizzly's Growlings Current Report

Market Update Thursday 05/18/2000 5:00 a.m.

"It's Make or Break Time"

Briefly tonight, we will update you on the market action following Tuesday's 50 basis points (.5%) interest rate increase by the Fed.

The rate hike was decidedly anti-climatic. The 50 basis point increase had been widely expected and was already discounted into the markets. This buying accounted for much of the market strength on Monday and early Tuesday. 

But as we said last Thursday:

Don't be fooled by any short-term rallies. The rallies will be short in duration and potentially very sharp, but they will serve their purpose by relieving the short-term over-sold condition and clearing the way for the next leg down.

The Dow Jones Industrials immediately dipped 100 points following the Fed announcement, only to be yanked up like a yo-yo and close just about where it was before the announcement. Today the Industrials promptly fell 165 points, or 1.5%.

Volume remains very light, with only 824 million shares traded on the NYSE Wednesday, while the NASDAQ could generate only traded about 1.2 billion shares. From our May 5th Market Update:

The selling climax, whenever it arrives, will bring record trading volumes, perhaps 2 billion NYSE shares and 3 billion on the NASDAQ. 

Again from our May 5th update:

"... the Elliott Wave patterns are saying that a devastating "third of a third" wave is just around the corner. The risk of crash next week or in the coming weeks is extraordinarily high. Caveat Emptor!"

It's been two weeks since those comments and it's now make or break time for the markets. The deck is stacked perfectly for a crash, beginning NOW. In Elliott Wave terms, we are likely in the early stages of the "third of a third" wave. This devastating move may take several weeks to fully play its hand. It will likely include an historic one-day crash.

We continue with our ongoing warning:

US STOCKS REMAIN ON FULL CRASH ALERT!

If the market does not begin its crash in the next two weeks or so, the Bull will have survived yet another potential turning point and likely will push ahead strongly into summer to new all-time highs. But we rate that probability on par with drawing to an inside straight. 

As we post this report early Thursday morning, there's no help for the bulls from overseas. The Nikkei 225 average in Tokyo has plunged by 330 points, or 2% and the Hang Seng in Hong Kong is suffering by 340 points, or 2.4%. 

As Jim Stack notes in this week's Chart of the Week, the NASDAQ has been unbelievably strong record in weeks containing Fed meetings.

In other words, the entire NASDAQ gain since late last June has essentially occurred during the seven weeks of the FOMC meetings - which included 5 interest rate hikes!

If we have begun a Great Bear Market, this time it will be different.

"You can't always get what you want. But if you try sometimes, you'll find, you can get what you need."
                           -- The Rolling Stones, "You can't always get what you want"

grizzly@bearmarketcentral.com
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