MARKET [MAYHEM] COMMENT
Dave Fry at ETF Digest, March 2, 2009
Friday’s podcast may seem a little late but at least you should give a listen to Greg Newton’s take on the nonsense about how all the whining for a reinstatement of the uptick rule is just a smokescreen.
Meanwhile, back to current market mayhem we go.
A slow response by the Bush Administration to the financial mess and baby-steps by Obama’s team is killing markets and confidence. Even if Geithner, Summers and Bernanke suddenly got the message, bit the bullet and did what they surely must do, it might be too late to regain respect.
Nevertheless, markets are almost in free-fall. What works one day is a flop the next whether gold, bonds, currency or stocks. The powerful market trends are blowing away most technical trading systems.
Volume was heavy on the NYSE led by financials naturally. We had a 90/10 negative day in volume and breadth.
Below is a monthly DeMark chart. It’s been noted previously that SPY has now achieved a perfected “9” reading on monthly charts for the period ending February. That should mean some bounce is in order as this trend may be exhausted. But, when don’t these counts work? When the trend is so powerful that its force overwhelms any technical readings including DeMark. Below is a good example using the monthly XLF (Financial Sector ETF) chart. Here you can see a 9 (not “perfected”) in the spring of 2008 that produced some sideways movement. That was followed by a new more powerful leg down. This produced a perfected 9 in December, but now it too has been overwhelmed by the action in January/February meaning the trend is very strong.
That sums up today’s activity.
Most reliable technical indicators are being blown away by the strength of the current decline. The only way to prosper in this environment for most investors has been to stay out or day-trade.
Nevertheless, the bullish bias from the financial media persists given who pays their tab. I was listening to Bloomberg radio this morning at the opening, and with conditions dire and economic news dripping blood, commentators were searching thru the rubble to find bullish shreds of news to pump folks up. That’s when I turned it off.
I got a kick out of Jeremy Siegel, the professor of Wisdom Tree fame. He wants to change their ETF dividend focus to exclude financials from their product menu. It’s always interesting to review a reasonably recent interview where the professor urges investors to buy financials—even average down no less! It’s from TheStreet.com:
The "Wizard of Wharton" says don’t worry.
"If investors have cash on the sidelines, they should not wait too long to put it to use," says Jeremy Siegel, Wharton business school professor at the University of Pennsylvania and well-known markets commentator. "There are good values out there in equities — especially in financial stocks — and you will be rewarded in the long run if you start dollar cost-averaging now."
You can read the article in its entirety here.
It’s also instructive to listen to Greg Newton’s thoughtful and correct take on the removal of the “uptick rule” as a false cause of the market’s fall.
March is coming in like a lion, but there are many days in the month ahead.
Let’s see what happens.
Disclaimer: Among other issues the ETF Digest maintains positions in: IEF, TLT, FXE, DRR, GLD and GDX.
