Grizzly's Growlings Current Report

Market Update Wednesday 05/24/2000 5:00 a.m.

"And Away We Go!"

Briefly tonight, we will update you on the market action following last Tuesday's interest rate increase by the Fed.

In a word, it's been all downhill for the markets, particularly the NASDAQ Composite index. The Comp has fallen every day since the Fed meeting, capped (so far) by Tuesday's 200 point (6%) mini-crash. All told, the Comp is down nearly 550 points (15%) in just those five days. 

At Tuesday's close of 3,164, the Comp is now at its low for the year. It is off nearly 2,000 points since its March 10th high of 5,132.

You didn't hear this from Dan Rather or Peter Jennings, but as analyst Ned Davis does points out, the NASDAQ Comp's 37% drop now exceeds that index's 36% "drop" ending in October 1987. Do you think the mainstream media are a bit gun-shy about reporting this fact?

As we said in our May 11th update:

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 any short-term oversold conditions and clearing the way for the next leg down.

Indeed, the NASD Comp mounted a courageous rebound in the last two hours of trading on Monday. The bulls inspired and impressed themselves with that 190 point rally, yet all that momentum simply evaporated by Tuesday's open. The Comp promptly gave back all of Monday's late rally and a bit more.

It looks and feels like the markets are in the grips of our anticipated "third of a third wave crash." If the markets plays their hand as we think it is dealt, then we should see the selling accelerate even further over the next 7-10 days into a selling climax, interrupted only by brief short-covering lead rallies. 

Volume remains very light, with only 866 million shares traded on the NYSE Tuesday, while the NASDAQ could generate only about 1.3 billion shares. Volume should thin out even further as we head into the Memorial Day holiday weekend.

We repeat our assessment from our May 18th update:

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 and it will likely include an historic one-day crash.

We continue with our ongoing warning:

US STOCKS REMAIN ON FULL CRASH ALERT!

As we post this report early Wednesday morning, the overnight futures on the NASDAQ 100 are down another 30 points, putting the futures at a 40 point discount to cash. 

Globex futures trading is notoriously thin and tentative, so the discount to cash may evaporate by the time trading opens in New York. But if it holds, look for perhaps another 100-125 point sell-off in the Comp in the first couple of hours, which then should mark a semi-solid bottom that should hold at least for a few days. 

There's also no help for the bulls from overseas overnight. The Nikkei 225 average in Tokyo has crossed below the key 16,000 level for the first time in just over a year. The path is now cleared for a crash in Tokyo as well as New York. 

How bad are things in Tokyo? Reuters reported Tuesday that Japanese consumer spending has fallen for an incredible 
37 consecutive months!! 

grizzly@bearmarketcentral.com

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