Wednesday, 7/24, Market WrapUp (What a difference a day makes!)

FinancialSense.com ^ | 07/24/2002 | by Scott Middleton

[Lazamataz]

 
Weekday Commentary from Scott Middleton
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What a difference a day makes!


"Volatile markets move on news and emotion."
Jim Puplava, 7/23/02

Note:  Reuters stories at end Commentary!

Storm Watch Update for 7/19/2002	Financial Sense Newshour Saturday's Guest Expert James E. Sinclair Chairman & CEO Tan Range Exploration The Fundamentals on Gold
Be sure to read Q & A with Jim Sinclair, the man Forbes calls "Mr. Goldbug." - comments on the current market in gold

Wednesday Market Scoreboard  July 24, 2002
Dow Industrials		488.95	8191.29
Dow Utilities		16.33	208.18
Dow Transports		23.57	2183.92
S & P 500		45.69	843.39
Nasdaq		60.96	1290.01
US Dollar to Yen			116.805
US Dollar to Euro			0.9941
Gold		1.2	311.4
Silver		0.02	4.86
Oil		0.56	26.87
CRB Index		0.22	211.21
Natural Gas		0.15	3.042
All market indexes The Week in Graphs Storm Watch Geopolitical News in Focus Energy Resource Page Precious Metals
	07/24	07/23	Change
HUI (Amex Gold Bugs Index)
Close YTD	111	105.73	5.27 70.09%
52week High	147.82	06/03/02
52week Low	59.86	11/26/01
XAU (Philadelphia Gold & Silver)
Close YTD	62.96	59.24	3.72 15.56%
52week High	88.65	05/28/02
52week Low	49.23	11/19/01

Main Page The Gold Price is Performing Well!	A Dragon With Many Heads July 23 Column

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 Market WrapUp for the Week 
Monday  l  Tuesday  l  Wednesday  l  Thursday  l  Friday

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^{Wednesday's Stock Market WrapUp}

Capitulation?
A day like today sure does make it seem like all is well in the financial markets. It was almost as if everyone just put on their happy face at about mid-morning and let it grow as the day went on. Well, maybe not everybody. Anyone who was short the market probably wasn’t smiling when the bell rang at 1:00pm EDT.

Contrarian sentiment believes that when the masses talk of impending doom you have reached capitulation and the current trend should reverse itself.  Case in point, yesterday you couldn’t find a positive quote on the markets, anywhere.  Where as today, previous predictions of the demise of the American financial system were greatly exaggerated.

Herein is a collection of quotes from various “experts” as posted in many of today’s market wraps:

``Anyone who buys now is going to be surprised at how well they've done a year from now,'' said Stanley Nabi, who helps oversee $57 billion at Credit Suisse Asset Management.

``There is a buying panic,'' said George Mairs, who manages $700 million at Mairs & Power Inc. in St. Paul, Minnesota. ``People are jumping to get in because they don't want to miss the bottom. No one is prepared to say the bear market has ended, but the magnitude of this rally is very impressive.''

``If you can remove your mind from the corporate bashing of the day and focus on fundamentals, stocks are cheap,'' said Robert Phillips, who helps oversee $800 million at Walnut Asset Management in Philadelphia.

Credit Suisse's Nabi said stocks would be fairly valued if the S&P 500 traded at about 22 times the $52 in per-share earnings he expects for the coming 12 months. The index now trades at about 16 times that profit estimate.

Richard Dickson of Hilliard Lyons notes that "Waterfall price declines accompanied by very heavy volume are, historically, very reliable indications of market bottoms. Most recently, the two best examples occurred in October 1987 and again in September 2001. Whether the current example proves to be a third remains to be seen, but we think chances are good that it will," he said. "Overall, we would be making a list of stocks to buy right now.”

Each one of these quotes seems awfully optimistic given ongoing market conditions.  Luckily for anyone giving the quotes they won’t be held accountable for their statements.

Today’s Financial Markets
The Dow Jones Industrial Average rose 488.95, or 6.4 percent, to 8191.29. That was its second-biggest point gain. The S&P 500 jumped 45.73, or 5.7 percent, to 843.43. Both had their largest percentage advance since rebounding from the crash in October 1987. The Nasdaq Composite Index added 61.18, or 5 percent, to 1290.23.

The New York Stock Exchange had its busiest day, with trading exceeding 2.7 billion shares, according to preliminary figures. More than four stocks rose for every three that fell on the Big Board and the Nasdaq Stock Market.

Treasury Market
The 10-year Treasury note tumbled 13/32 to yield 4.46 percent while the 30-year government bond slid 1 point to yield 5.345 percent.

© Copyright Scott Middleton, July 24, 2002

[Wyatt's Torch]

Interesting comment from a client of Trend Macro (Don Luskins outfit) -

Ashby Foote, Vector Money Management 5:45 PM "DO YOU BELIEVE IN MIRACLES?" ......... A sure sign that a bottom was close at hand came Monday night when Maria Bartoromo on her evening show interviewed Al Michaels, one of the great sports announcers, almost as good as Chris Berman. Michaels evidently is an avid and successful investor. Significantly, the last 80% of the interview focused on short selling and how Michaels identified good candidates for shorting. cheers, ashby

Remeber the Joseph Kennedy story from 1929. He knew it was time to sell when he started getting tips from his shoe shine boy.

[Soren]

This morning I was listening to the 'Opening Bell' on a local AM station on the way to work. A Morgan Stanley analyst came on and babbled on about investor sentiment. The announcer kind of laughed (obviously not following what she said) and then said "so... just hold for the long term, right?". The response "Absolutely". Right from the script.

[Ernest_at_the_Beach]

Nice job, uh what is PPT?

[cibco]

Laz, rohry will be so proud of you... :0) Thanks for the Wrap Up.

[Soren]

Man, I'm trying not to over-react but.. BoA, Citi, JPM... this is huge, is it not?

Do you have any thoughts on broker risk? The reason I ask is that my main broker is a subsid of JPM. I know they have insurance, but are there still any risks related to a parent bankruptcy? TIA.

[Lazamataz]

PPT is the (possibly fictional) Plunge Protection Team, who (theoretically) pump money into the markets if they fall too much.

[Lazamataz]

:o)

I live to serve.

[Dales]

I dare anyone to try to predict what's going to happen over the next week.

The market will open tomorrow and begin tanking as profit takers secure some gains. Over the course of the day, some of that bloodletting will be offset.

Then on Friday there will be a low volume day with small gains as the market assumes a wait-and-see atmosphere.

Then next week two of the first three days will have solid but unspectacular gains with the other being a slight setback. Looking at somewhere around a DOW 8500 by COB Wednesday.

I have no reason to predict this other than it sounds plausible and you dared me :-)

[Ernest_at_the_Beach]

Thanks, I had heard the phrase Plunge Protection Team but didn't connect the PPT with that!

Duh!

[tomahawk]

BS

[jwh_Denver]

PPT is the (possibly fictional) Plunge Protection Team

Actually there is part of the PPT that is not fictional. I think it is called the The Working Group on Financial Markets though I may be wrong on the real name. It is a Federal gubmint group. Actually I do believe there is a PPT but the players may change from time to time. Their purpose is to manipulate the markets so you make tons, I mean TONS of money. If you believe that..........haha.

[Dukie]

I'm going to go out on a limb here and make a prediction: I think July 23 will mark the end of the downward movement in gold. However, the Dow will fall lower than yesterday's close. Bear markets do not end in 400+ moves up.

[jwh_Denver]

Yesterday, I predicted today's action . . . except in the other direction.

I figured either Tues or today would be a rally just on a technical basis. The market had gone down too far too fast. In a normal market we would have seen the bounce last week but these are times of extremes. I agree the PPT was working overtime but all they had to do was keep the market up $100 and the shorters goose it up by covering. What's changed fundamentally since yesterday? It's even worse but watch the suckers run and jump on a sinking ship. I've been looking for a rally but I can't see this putz going past next Thurs. And that's my longest figuring. I would say Tues will be the end of it.

[Gritty]

I second that.

I wish the market would stay up, for the sake of this Republic. But, I'm afraid this is just another bear market rally and a spectacular one at that!

IMHO, gold will continue up, but it will hit the wall again before 330 and continue to bounce back and forth down to the present levels before it ultimately takes off upwards. IMHO, it won't really soar until the end of this kabuki dance is nigh and the financial meltdown is unstoppable.

Lord help us! These times are going to be really trying before they are over.

[Wyatt's Torch]

What's changed fundamentally since yesterday?

That, my friend, is the $1 Trillion dollar question. Even the professionals who have gotten it so wrong over the last 3 years are saying the same thing -

"We're way due for a bounce, but fundamentals haven't changed," said Matthew Johnson, managing director of trading at Lehman Brothers. "We're still dealing with terrorism, accounting issues and fundamentals, which appear to be showing signs of further deterioration."

[Dukie]

Did you happen to see the video of the marshalls arresting Adelphia's John Riegas and his two sons. They are accused of exactly the same sort of deals played by "Kenny boy" and his cohorts at Enron, yet no arrests were made of that crew. It just goes to prove the benefits of having friends in high places. No coincidence that these guys were hauled in with the cameras rolling on the same day that the House & Senate agreed on the matter of financial reforms.

[Dukie]

Advance decline ratio was close today. I heard a speculation that in the large pension funds the allocations percentages between stocks, bonds, notes, etc had been so skewed by the downward trending equities that portfolio adjustments may have been responsible for a substantial portion of this move today.

[grania]

I have no reason to predict this other than it sounds plausible and you dared me :-)

I have archived your predictions and will probably use them only if they are imperfect, which is highly unlikely, I assume.

[tubebender]

Can someone post a chart of the DOW from OCT 87 until about April of 88. My wife and I owned about 5 stocks at the time and stayed tuff till Jan when we got so dizzy from the market gyrations that we bailed. There were so many 300 to 500 highs and lows that you needed dramamine to keep from puking.

[Lazamataz]

Lord help us! These times are going to be really trying before they are over.

Faith. Patience. Do not overestimate gloom and do not underestimate the power and ingenuity of the Murrican Pipple.