Grizzly's Growlings10/18/99

Monday Morning Market Musings 10/18/99

WWWW

No, not "Wonderful World Wide Web" but "Wow, What a Weak Week!"

How weak? Well, things couldn't get much worse, except for a crash, which very well may be right around the corner.

Here are just a few highlights (or lowlights, depending on your perspective) from last week:

The week's 630-point drop in the DJIA was its largest point-sized drop ever. The 5.9% drop for the week was its worst percentage performance since 1989. The DJIA is now down 11.5% from its August 25 peak of 11,326. ·
The S&P 500 is now up only 1.5% YTD, about half of what you would have earned in a money market mutual fund.
Friday's breadth was an abysmal, with more losers outpacing gainers by more than 3.4 to 1. ·
For the week, the NYSE was home to 814 new 52-week lows, nine times the number of new highs. ·
Despite, or perhaps because of, the week's sharp declines, the bulls have little strength left to mount a counter-trend rally. ·
Friday's TRIN reading came in at a relatively neutral 1.15, Incredibly the TRIN ten day moving average is still in overbought territory. ·
As we go to press early Monday morning, the DJIA futures have slipped another 74 points. The S&P 500 futures are down a more modest 3.90. ·
The Asian markets are down sharply across the board overnight, led by a 348 point (2%) haircut in Tokyo. The smaller markets in Singapore, Thailand, South Korea and Indonesia are down 3-4.4%. ·
Perhaps most bearish of all, as wavemaster Robert Prechter of Elliott Wave International and market historian Steve Puetz of the Steve Puetz Letter point out, the market crashes in 1929, 1987, and others have occurred exactly 55 days from the market's prior peak. Tuesday marks 55 days from the DJIA's August 25th closing high, as well as the 12-year anniversary of the Crash of '87. ·
Potentially supporting the Crash scenario is the fact that the markets have traced out very bearish Elliott Wave patterns since the August highs. The DJIA, S&P 500, and other Blue Chip Indices have traced out very bearish 1-2, 1-2 patterns, which precede the "third of a third" wave, the most potent and extended price movement of the five-wave Elliott sequence.
The NASD Composite has traced out a difference but equally bearish pattern: an ending diagonal triangle 5th wave up through last Tuesday's intraday record of 2586. Diagonal triangles often are followed by swift and sharp movements, potentially a crash in this case, down toward the triangle's origin, around the 2,100 level. ·
The DJIA dipped its toe below the psychologically important 10,000 level before rebounding a bit and closing at 10,020. The sound of ninety-nine and change or ninety-seven something just doesn't have the same ring to it.

Given the above, there is no change in our basic outlook as stated three weeks ago:

A "Bear Market " is generally defined as a 20% drop. We think the New Bear Party has "bearly" just begun. By the time the Fat Bear has had his fill, we'll have seen the major market indices down by 50-60-70%. We think from here on out, for the next 12-18 months at a minimum, the markets are headed lower, much lower. We think the odds are very high that the Crash of 1999-2000 will make 1987 look like the proverbial pimple on an elephant's butt.

US STOCKS REMAIN ON FULL CRASH ALERT!

Digressions to ease the soul of the overanxious Bear:

The White House trotted out economic advisor turned sacrificial lamb Gene Sperling to issue the obligatory "the economy is sound" reaffirmation following Friday's mini-crash.
Sir Alan of Greenspan spoke Thursday evening and his minions and lemmings acted thereupon Friday morning. By the time the Great Bear Market has run its course, Sir Alan will have been excommunicated by the keepers of Church of the Financial Foolery.
This week's IPO title match-up goes to cable TV dominator WWF and its 900 pound gorilla Vince McMahon vs. 120 pound good living and marketing champion Martha Stewart. Both should bring in more than $150 million, plus substantial profits for those think they are lucky enough to get in the IPO itself. After the sparkle in the title belt fades and tarnishes, they won't be feeling so fortunate.