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Monday Morning Market Musings
08/12/98
1,000
down, How Far to Go?
The Dow Jones Industrial Average has now fallen 1,000 (intraday) points from its 9368 peak on July 17th. 1,000 down, with the historically worst months of the year, September and October, just around the corner.
Like the new NFL season, we're still in training camp. What we've seen over the last few weeks is just a warm-up to what will come over the next few months.
Tuesday’s action in the DJIA from the morning low around 8350 appears to be corrective in nature and it appears to be complete, or nearly so. No doubt about it, the major trend is down, down, down. Look for more massive selling to resume from today's closing level, or slightly above. 500 more points to the downside on the DJIA over the next few days on 1 billion NYSE shares would not be a surprise. That should be enough to bring out enough dip-buyers to put a temporary halt to the drop. Then, look out beeeeeelooooow!!
Yes, the Bear has come out of hibernation and he's whetted his appetite for the first time since 1987. He hasn’t had his fill, not by a long shot. He’s just had an appetizer.
The RUT closed Tuesday just a hair above 400. It's now down 19% from its springtime high.
Also down the same amount is the TSE 300. Little noticed by most US investors, Canadians are being hit with a triple whammy: the drop in the equity markets, the drop in precious metals prices, and the drop in the Canadian $ vs. the US $. All together now: "Oh Ca-na-da...!"
One thing that is somewhat worrisome to the short-term bearish view: it seems all of a sudden, everyone is hip to market psychology. Several reporters on CNBC and CNN as well as the national radio networks noted that there has been no panicking; no selling climax, no blood in the streets. They reported that the market decline was orderly and calm. They (correctly) noted that we won’t see a solid bottom until there IS a chaotic panic; until they’re crying "UNCLE!," until the losses are large enough to strike fear in the hearts of those who are still clinging to large paper profits.
Yet the fact that all this has become commonly accepted in the current scenario makes one wonder whether the market won’t make a fake-out move to the upside just to keep all the new bears on their toes. We shall see.
Balancing this newfound wisdom is the fact that most analysts are still preaching "buy the dips." Still only a handful of investment advisors, led by Bob Prechter of Elliott Wave International, Peter Eliades of Stockmarket Cycles, and Jim Stack of InvesTech, are screaming "SELL!! SELL!! SELL!!"
Bear-Friendly Funds Update: Tuesday 08/11/98
| BEARX | $6.14 | +.20 | +3.37% |
| URPSX | $9.02 | +.28 | +3.20% |
| RYURX | $5.21 | +.08 | +1.56% |
As we go to press 2:00 a.m. EDT Wednesday morning, Asian markets are mostly lower. Manila is down 4.75%; Shanghai is down 3%; New Zealand down 2%. The Moscow Times Index has crashed; down 22%. As noted above, the rally late Tuesday afternoon in the DJIA appears to have been corrective, so there’s a solid chance the selling will resume at or shortly after the opening Wednesday.
Grizzly
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