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Asian tail wagging the US dog
As with last week, things are shaping up to be another rough Monday on Wall Street. As we go to press 11:30 p.m. EST Sunday 08/02, stocks are down sharply across the board in Asia. The Hang Seng index in Hong Kong is down nearly 5%. The PSE in Manila is down 4%. So is Malaysia. The Nikkei 225 in Tokyo is down about 1.25%.
The European markets are irrelevant at this juncture. Asia is the tail wagging the US market dog. Last Monday the DJIA followed Asia's lead and dropped sharply at the open. But the selling was short-lived and the market rebounded strongly throughout the day to close up 91 points.
Tuesday may be different. If a true bear market has begun, strong intraday rebounds like last Monday will be few and far between. The underlying market weakness will permeate the action and keep rallies and rebounds short, choppy, and unconvincing.
What's so weak about the market? Unnoticed by most, the DJTA dropped 105 points, 3%, last week. The Russell 2000 is down YTD, and barely positive over 07/31/97. Over at the NASD, weekly 52 week lows hit 811 vs. just 112 new highs.
As we said a couple of weeks ago, "the markets have run out of gas, nary a service station in site. Plus, there's a huge hole in the gas tank, and the carburetor is clogged. In "short," there's nothing to do except coast downhill."
What about the dip-buyers? They're too busy trying to figure out how the Clinton Administration will get out of the latest mess.
What will the president say to the grand jury? Even if Ken Starr has the literal dirty laundry on him, will Congress really impeach him over such a trivial personal indiscretion? (Only the legions of lawyers and media hacks covering the case care that it's really about perjury and obstruction of justice, not whether the president was getting a little on the side from a naive intern barely older than First Daughter Chelsea.)
Things could become very nasty this week, on Wall Street and on Pennsylvania Avenue.
Grizzly
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