| Grizzly's Growlings Back Issues |
Monday Morning Market Musings 08/24/98
Asians stocks down sharply
(again).
Leading the way is the Nikkei 225, back down below 15,000 with an early morning drop of 400 points, or 2.66%. Malaysia and Indonesia are down about 4.5%, Manila and Taiwan are down about 3.5%.
The sell-off should continue when Europe opens, as the situation in Russia is now spiraling out of control. Boris Yeltsin fired the entire Russian Cabinet over the weekend! The Moscow Times Index is down a stunning and staggering 77% so far in 1998.
Get up to the minute news and the inside story on the dramatic events unfolding in Russia with our new link to russiatoday.com.
It's hard to believe that with all the downside action in the markets last week, the DJIA managed to close with a 108 point gain, its first weekly closing gain in five weeks.
The 300 point intraday drop on Friday was followed by an equally strong rally back up to 8533. No doubt the rally was assisted by arbs and dealers who had other positions to square up on the double-witching day. As usual of late, the RUT lagged badly, closing down nearly two percent for the week.
The TRIN (a.k.a. ARMS) index hit 4.00 at Friday’s intraday bottom, a very rare and deeply oversold level. Rebounds like Friday afternoon's serve to relieve such overblown short-term readings, thus clearing the way for the next leg down.
Contrarians and commentators have been paying a lot of attention to the put/call ratio, arguing that its solidly bearish level is a reliable contrary indicator. The "too many bears argument." As Robert Prechter, Joe Granville, and others have noted, the sentiment in October 1929 was very bearish. Observers of the day cited the fact that there were just too many bears for the market to continue to drop. Occasionally, the majority IS right!
Some have asked whether the so-called circuit breakers will help stop a panic crash. Forget about it. With recent changes approved by he SEC,, the DJIA must now drop some 900 points before a trading halt is declared. No matter - circuit breakers tend to accelerate rather than stop declines anyway. Sellers see the target and want to get out before it's hit. They'll readily sell at a small loss to avoid holding a big position with no way to get out. So, these lower "targets" should draw the market with much greater speed and force.
US stocks remain on FULL CRASH ALERT. It’s going to get very ugly very soon, possibly starting today. In Elliott wave terms, a major "wave 3 of 3" crash could begin any day now, For non-wavers, this means that "we ain't seen nuttin' yet." The "meat of the move" is about to unfold, one that should take the DJIA below 7000 at a bare minimum before it mounts a worthy rebound.
Indeed, it was such a busy week we almost forgot to mention that minor tremor on Monday evening. Last week we said "..the only strategy that can put an end to the whole Monica Lewinsky 'affair' and salvage the Clinton Presidency is 'the truth, the whole truth, and nothing but the truth.' "
President Clinton did not deliver such a message. He did not utter the words "I’m sorry." He could not find it within himself to say "I apologize." He will be sorry; sorry that he blew the shortest but perhaps most important speech of his life.
The post-confession rally leads one to believe the public was genuinely worried and then relieved about the whole affair. Elliott Wave analysts read it as a brief corrective rebound. The next big wave down could lead or coincide with Clinton’s resignation.
Clinton’s 1996 re-election campaign lived by the expression "It’s the economy, stupid!!" Well, when the economy does turn down and when Clinton ultimately resigns, they’ll be moaning "It’s the stupid economy!"
"A free society is one where it is
safe to be unpopular."
-- Adlai Stevenson
Grizzly
Please read the disclaimer.