What a mess!
We should have packed it in on Tuesday morning but now we’re stuck here and not at all happy about it. Stocks are hell bent on driving down to retest mid-July lows ahead of tomorrow’s jobs report with Non-Farm Payrolls expected to fall more than 75,000 and unemployment expected to jump to 5.8% despite a positive note on the ADP report.
I’ll be giving my take on this in the morning post but I will restate here what I said in comments last night:
There is a MASSIVE effort to get everyone out of the markets. If the funds really wanted to sell, they wouldn’t be on TV warning everyone to get out ahead of them would they? This is about the big guys who came back from vacation, saw some weakness and decided to see how low they can push it before they jump in.
What I’m watching is that July 1st line at 1,280 on the S&P and thinking that funds need at least 1,344 (+5%) by the end of this month to keep investors interested. They also need to outperform that 5% so the trick is to force a bottom and, when it’s down 5% at 1,216, then jump in and push for a 10% return on the bulk of their purchases. Today was a 3% day and that was 38 SPX points and you can’t count on that every day so let’s say you figure you can average 15 points a day and there’s 128 points from target bottom to target top. That means they need 10 working days to get there minimum. Since the month ends on a Monday, effectively 10 days includes expiration week and that would be cutting it really close so I’m looking for a quick turn up from the bottom if I’m right but we still may have a bit lower to go.
The same numbers for the Dow would take us from 11,400, where we started the Q, to 10,830 – that would be ugly but it’s not about the Dow, with just 30 components who have been stubbornly bullish despite many attempts to drive it down. The NYSE is off from 8,650 to 8000 (7.5%) – all the way back to 2006 lows (before we rallied 2,500 points) and the Nasdaq is only just today lower than the 2,300 it started the month at and I’m pretty certain they are dying to get it down to 2,185 so that’s another day like today for all the indicies and buyers should be chomping at the bit to get back in but even though I believe that, I’m not sure I can take another day like today…
So that’s all well and good but let’s see how that translates into the Big Chart:
|
|
|
Week’s |
25% |
20% |
Feeling |
50 |
|
Index |
Current |
Move |
Terror |
Horror |
Better |
DMA |
| Dow | 11,188 | -527 | 10,644 | 11,354 | 11,808 | 12,336 |
| Transports | 2,366 | -97 | 2,336 | 2,491 | 2,591 | 2,565 |
| S&P | 1,236 | -64 | 1,182 | 1,261 | 1,311 | 1,355 |
| NYSE | 8,008 | -458 | 7,790 | 8,310 | 8,642 | 9,028 |
| Nasdaq | 2,259 | -152 | 2,146 | 2,289 | 2,380 | 2,407 |
| SOX | 324 | -38 | 419 | 447 | 465 | 374 |
| Russell | 718 | -29 | 642 | 684 | 712 | 718 |
| Hang Seng | 20,356 | -616 | 24,000 | 25,600 | 26,624 | 24,245 |
| Nikkei | 12,557 | -211 | 13,725 | 14,640 | 15,226 | 13,732 |
| BSE (India) | 14,899 | 851 | 15,900 | 16,960 | 17,638 | 16,713 |
| DAX | 6,279 | -141 | 6,088 | 6,494 | 6,753 | 6,887 |
| CAC 40 | 4,304 | -157 | 4,626 | 4,934 | 5,132 | 4,844 |
| FTSE | 5,362 | -239 | 5,066 | 5,403 | 5,619 | 5,877 |
You know, I’ve seen worse! Congrats to the Russell for keeping the faith, we discussed yesterday morning how the small cap index is perfect for this economic environment and they are (so far) holding up quite well. We fell all the way back to 20% off the highs on the Dow, the S&P, the NYSE and the Nasdaq (which was ALL green just last week). The SOX are in a state of meltdown but we’ll see what happens tomorrow with SNDK getting an offer from Samsung (I told you they were too cheap!). The Nasdaq lost 7% this week led by a 12% drop in the SOX while the rest of the indexes pretty much hit the 5% rule so tomorrow’s action is very critical.
As bad as Asia and Europe look, on a percentage basis they did better than we did this week with the Hang Seng dropping "just" 3% and the Nikkei off just 2%. The BSE is actually up 6% for the week but still 30% off it’s highs of 21,200 back in December. The Hang Seng is down 36% from 32,000 last October and the Nikke topped out at 18,300 in March and July of last year before falling 31%, still well off the March lows of 12,000.
Europe is also holding up better than we are with France and England falling just 4% and the DAX lost just 2% this week. Does that sound surprising? It should as "global weakness" is this week’s excuse for taking down the US markets but the facts simply are not supporting the hype. As I said yesterday, even if I’m right, the markets can remain irrational longer than we can afford to wait it out and we do have to roll back to October positions to buy a little time for the markets to regain sanity. I’ve been holding off, hoping for a bounce to roll on but none is coming so far but oil is heading lower and lower and the premise that it’s because of mass global depression is simply BS so I’m really not sure what to do.
I don’t want to cover as I’m fearing a huge snap-back next week but going into the weekend naked sounds terrifying too. Very tough market all around, everyone is frustrated, veteran traders are thowing up their hands but we’re not getting panic – perhaps panic would be better than malaise though…
