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Grizzly's
Growlings Back Issues
Monday Morning Market Musings 10/12/98
Make or Break Time
Last week saw a continuation of the consolidation and choppiness exhibited over the prior six weeks. The markets demonstrated vast intraday volatility, with multiple 100-150 point swings in the DJIA becoming the norm. There was little net change Monday through Thursday, though Friday saw a large but thin rally. The DJIA gained 167 points to close the week at 7900. Despite this 2% rally, the DJIA has made virtually no net progress over the past seven weeks.
This is a make or break week for the market. The consolidation is running out of time and energy. The 5-day moving average of the TRIN (ARMS) index is at an extremely overbought reading of .802, its lowest level since the market top on July 20th. TRIN is a measure of the buying or selling power expended to make the market move, either up or down. The fact that the markets haven’t been able to mount a convincing and lasting rally, despite expending enormous amounts of purchasing power, is an extremely negative indicator for short-term market action. If the past seven weeks of no net progress is the best the markets can do, it’s all over for the Bulls.
Elliott Wave analysts take note: Alan Greenspan warned last week that a "fear-induced psychological response" was gripping the world’s financial markets, and it was bound to cramp the US economy. Maybe such official confirmation will finally mark the beginning of the long-awaited wave 3 of 3 crash.
US stocks remain on FULL CRASH ALERT!
Believe in conspiracies? The latest is a so-called Plunge Protection Team, which has been at work buying the dips over the past few weeks. Last week, all but the benchmark Dow Jones Industrial Average broke to new lows before closing strongly on Friday. Seems the PPT is doing its best to keep the highest profile, blue-est of the Blue Chip indices in good standing as long as possible. Seems it’s much easier (and less expensive) to manipulate the 30 stocks in the DJIA than the 500 stocks in the S&P or the 2000 in the Russell.
The markets are strong going into Monday morning trading on Wall Street. At press time at 1:00am EDT, the Asian markets are being lead by a 5% gain in the Nikkei 225, pushing it back over 13,000. The S&P 500 futures trading on Globex are up 7 points. Monday morning will be the market's last shot to make it or break it.
Things have gone from bad to worse to desperate in Russia:
- The country is suffering through its worst harvest in 45 years. It’s so bad they’ve quietly requested humanitarian relief aid from Europe, Canada, and the US.
- Inflation is running at a 38% annual rate. It doesn’t matter much; not many Russians have any cash to spend anyway.
- Perhaps a million workers, retirees, and students joined in mass demonstrations across the country last Wednesday, calling for Yeltsin’s resignation.
It's official!
US Rep. Dick Armey (R-Texas) summed it up best on one of the Sunday morning shows: "The IMF on balance does more harm than good." At their meeting last week in Washington, the IMFers lived up to their acronym, Impotent Meddling Fools. Despite the worst economic conditions in at least 65 years, despite unprecedented nervousness and volatility in the financial markets, and with absolutely no light at the end of the tunnel, they accomplished precisely nothing.
India’s finance minister said: "The brute fact is that after five days of intense discussion and debate, we are still at a loss as to why contagion has continued to spread. Nor do we seem to have achieved clear, agreed and effective measures to contain the crisis." The Thai finance minister added: "I’m afraid the markets will be disappointed." What an understatement!
The dollar promptly plunged 8% against the yen on Wednesday, it’s largest one-day drop in 25 years. The buck went on to finish the week down 13.7% against the yen. (See what you get for lowering interest rates, Alan Greenspan!) The Economist attributed the plunge in the buck to the unwinding of positions held by basket-case hedge fund Long Term Capital Management.
US T-Bonds ran into the same buzzsaw and crashed with the buck, falling about 7 points. The yield rose an incredible 42 basis points from its all-time low last Monday of 4.70%.
Look for more such dramatic moves in other markets across the investment spectrum as investors and speculators alike seek refuge anywhere they can find it. The precious metals are very vulnerable and may be the next to take a hit.
Once very wealthy, actor George Raft went bankrupt in 1947. A reporter asked this question about his situation: "Mr. Raft, how could you go bankrupt when you made millions in the 1930's, " to which George Raft replied: "Well, I spent some of the money on women, some on the horses and some on gambling - the rest I just wasted."
Grizzly
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