Brigitte
21.12.2000, 14:37
Ein bißchen sehr spät heute, sorry, mein PC hat gekränkelt.
* * * *
12/20/00 Investment House Daily
* * * *
Investment House Daily Subscribers:
TONIGHT:
- Lots of bad news and a major selloff.
- Earnings ahead of estimates? Might as well have missed them as PALM
found out.
- Crude oil plummets: no real inventory problem after all and a very weak
manufacturing sector.
- Housing starts higher, but not really: multi-family units are not the
key
- Tomorrow: we see signs of a reflex rally coming
- Team Trades
The day after the Fed no-action shows action speaks louder than words.
As expected, the selling started at the open. Stocks tried three rally
attempts in the first hour and one-half, but those failed. We were
looking for a sharp selloff and reversal. We did not, however, see a
surge in buying on any of those rally attempts as we waited to see what
the market was going to do. Indeed, when we saw the first attempt fail,
it gave us an idea that there would have to be some more selling before
any reflex rally attempt really took off. As usual, we sat back to watch
for the first hour to pass and see what happened. The second rally
attempt looked better, but then it started to fail right before the first
hour was up, and when it undercut the first test of the open, we were
pretty sure any rally would have to come later in the session.
It never really came, though we did make a play or two to the upside on
some techs at the end of the day. At the end of the day, the Nasdaq hit a
21-month low (March 1999 levels) and is now 54% off of its high at 5048.
The S&P 500 was handed its worst single day loss since October 1999. The
Dow took a stand at support, but it was a weak one as it finished on its
low. Volumes were astounding. The Nasdaq sold on 2.852 billion shares.
NYSE volume was over 1.4 billion shares. Lots of distribution and running
to safety.
The market was going to get off to a bad start with a Merrill downgrade of
CSCO, IBM and HWP. That was on top of FDRY's warning last night and JBL's
earnings miss. The concern is that companies are not going to spend as
much on IT next year. CSCO has said it sees robust growth and has always
been right, but investors today felt that Merrill knows best. They sold
it all today on high volume.
A rate cut would have helped . . .
One has to wonder at the timing of Merrill's release. If the Fed had cut
rates, perhaps Merrill would have felt that the inflow of capital into the
economy would help stave off the economic troubles ahead. Without the
rate cut there won't be anymore money flowing into investment for at least
six more weeks if the Fed sticks to its FOMC schedule to address interest
rate issues. If this was Merrill's basis for today's announcement, we
have to say it was pretty insightful, ignoring the issue of whether they
are right or not.
Without a cut, the bias shift did not offer any lifesaver to the market;
more like added some concrete blocks on its feet as it plunges to new
depths. Words do not equal money. A bias change means nothing as the Fed
is not held to its bias. The market knows that bear markets tend to end
when rates are actually cut. The reaction today was not even remotely
positive.
News tonight did not get much better with more warnings and earnings.
AT&T said it will not make its earnings and will slash its dividend. CNXT
warned it will miss estimates. The list goes on. PALM beat estimates and
was socked another $7 to the downside on top of the $6 it lost in the
regular session. Good news is not salve in this market. On the other
hand, MU missed its earnings but was about flat after hours on the news.
Maybe after seven days of selling bad news is not having the debilitating
impact it did earlier in the week.
Crude oil plummets.
Crude dropped over $2 per barrel today to an 8-month low on news of large
inventories. Let's see, about two months ago the television was filled
with analysts crying over lack of product and refining capacity. At the
time we said it was hogwash; that it was all political. Remember, we went
from a world awash in oil and excess inventories that gave OPEC the idea
to cut production to try and prop up the price. All of the sudden, there
was no oil and there was no refining capacity. Panic ensued and drove
prices through the roof. We said it was baloney and would work itself out
by Christmas. It looks as if it is going to do just that.
The infuriating thing? We all had to pay billions in higher gas, heating
oil, and electric prices. Further? Some regional airlines went bankrupt
during the fiasco. You have seen politics at work, not supply and demand.
The sad ironies. The plummet in oil back into the mid-twenties is where
it is pretty much stable given the previous world economic picture. Now
the world economic picture is much worse and oil prices may drop lower to
reflect poor demand. The irony? OPEC did not want oil to rise too far to
push the west into recession and thus have the price fall back to the
teens or low twenties. The panic certainly did not help world economies.
But the real irony is that while OPEC was trying to avoid pushing the west
into recession and thus killing demand for its product, it looks as if the
west may have done that to itself by missing indicators of a rapid
economic slowdown. Did we do it to ourselves and the price of oil was
just a bit player?
THE ECONOMY
Housing starts were the news for today. Overall it was up 2.2% to 1.562
million units versus expectations of 1.54 million. On its face, that
seems to fly into the face of an economic slowdown theory. That does not,
however, take into account that the increase was due to multi-family
housing, i.e., apartments. Those are not the types of units that drive
the rest of the economy. Single-family homes are the key, and they fell
0.4% from the previous month. Mortgage rates, while continuing to slide,
are not leading to more housing starts. Indeed, the National Association
of Home Builders expects the market to cool even more despite lower rates
as consumer confidence continues to fall. On the bright side, at least
there is still construction going on and putting people to work. That
helps.
Tomorrow the final GDP revision is out. By this time there should not be
any real change. The key will be the fourth quarter GDP that is out
shortly after the new year. The bigger report tomorrow will be jobless
claims once again. Claims are expected to rise to 340,000 versus last
week's 320,000. This is a leading indicator versus the unemployment
summary that comes out mid-month. It has been trending sharply higher,
and it does have the Fed concerned, just not enough at this point.
THE MARKETS
Ugly got uglier. But, even though the reflex rally we were looking for
today did not materialize, we see some good signs it will do so tomorrow.
That does not mean that any upside we get is a buy and hold rally. Bear
market rallies can be intense, but they usually fail. At this point there
is no sign things have turned: no rate cut, slowing earnings, slowing
economy, not enough fear. Moreover, we have not had a Nasdaq rally last
longer than two consecutive days since September, so any move up is
suspect. Even with that, the VIX hit 36.75 on its high, over the level
that has started recent rallies, 2300 held today on the test, seven days
of brutal selling, and we see many big tech stocks showing doji's on high
volume. Signs of a reflex bounce. If we get more selling in the morning,
that plays into the hands of an intraday reversal.
Overall market stats:
VIX: 35.78; +4.97. 36.75 on the high. This was the spike that we were
looking for that could act as the trigger for the next quasi-rally. These
have given us enough to trade.
Put/Call ratio: 0.80;
* * * *
12/20/00 Investment House Daily
* * * *
Investment House Daily Subscribers:
TONIGHT:
- Lots of bad news and a major selloff.
- Earnings ahead of estimates? Might as well have missed them as PALM
found out.
- Crude oil plummets: no real inventory problem after all and a very weak
manufacturing sector.
- Housing starts higher, but not really: multi-family units are not the
key
- Tomorrow: we see signs of a reflex rally coming
- Team Trades
The day after the Fed no-action shows action speaks louder than words.
As expected, the selling started at the open. Stocks tried three rally
attempts in the first hour and one-half, but those failed. We were
looking for a sharp selloff and reversal. We did not, however, see a
surge in buying on any of those rally attempts as we waited to see what
the market was going to do. Indeed, when we saw the first attempt fail,
it gave us an idea that there would have to be some more selling before
any reflex rally attempt really took off. As usual, we sat back to watch
for the first hour to pass and see what happened. The second rally
attempt looked better, but then it started to fail right before the first
hour was up, and when it undercut the first test of the open, we were
pretty sure any rally would have to come later in the session.
It never really came, though we did make a play or two to the upside on
some techs at the end of the day. At the end of the day, the Nasdaq hit a
21-month low (March 1999 levels) and is now 54% off of its high at 5048.
The S&P 500 was handed its worst single day loss since October 1999. The
Dow took a stand at support, but it was a weak one as it finished on its
low. Volumes were astounding. The Nasdaq sold on 2.852 billion shares.
NYSE volume was over 1.4 billion shares. Lots of distribution and running
to safety.
The market was going to get off to a bad start with a Merrill downgrade of
CSCO, IBM and HWP. That was on top of FDRY's warning last night and JBL's
earnings miss. The concern is that companies are not going to spend as
much on IT next year. CSCO has said it sees robust growth and has always
been right, but investors today felt that Merrill knows best. They sold
it all today on high volume.
A rate cut would have helped . . .
One has to wonder at the timing of Merrill's release. If the Fed had cut
rates, perhaps Merrill would have felt that the inflow of capital into the
economy would help stave off the economic troubles ahead. Without the
rate cut there won't be anymore money flowing into investment for at least
six more weeks if the Fed sticks to its FOMC schedule to address interest
rate issues. If this was Merrill's basis for today's announcement, we
have to say it was pretty insightful, ignoring the issue of whether they
are right or not.
Without a cut, the bias shift did not offer any lifesaver to the market;
more like added some concrete blocks on its feet as it plunges to new
depths. Words do not equal money. A bias change means nothing as the Fed
is not held to its bias. The market knows that bear markets tend to end
when rates are actually cut. The reaction today was not even remotely
positive.
News tonight did not get much better with more warnings and earnings.
AT&T said it will not make its earnings and will slash its dividend. CNXT
warned it will miss estimates. The list goes on. PALM beat estimates and
was socked another $7 to the downside on top of the $6 it lost in the
regular session. Good news is not salve in this market. On the other
hand, MU missed its earnings but was about flat after hours on the news.
Maybe after seven days of selling bad news is not having the debilitating
impact it did earlier in the week.
Crude oil plummets.
Crude dropped over $2 per barrel today to an 8-month low on news of large
inventories. Let's see, about two months ago the television was filled
with analysts crying over lack of product and refining capacity. At the
time we said it was hogwash; that it was all political. Remember, we went
from a world awash in oil and excess inventories that gave OPEC the idea
to cut production to try and prop up the price. All of the sudden, there
was no oil and there was no refining capacity. Panic ensued and drove
prices through the roof. We said it was baloney and would work itself out
by Christmas. It looks as if it is going to do just that.
The infuriating thing? We all had to pay billions in higher gas, heating
oil, and electric prices. Further? Some regional airlines went bankrupt
during the fiasco. You have seen politics at work, not supply and demand.
The sad ironies. The plummet in oil back into the mid-twenties is where
it is pretty much stable given the previous world economic picture. Now
the world economic picture is much worse and oil prices may drop lower to
reflect poor demand. The irony? OPEC did not want oil to rise too far to
push the west into recession and thus have the price fall back to the
teens or low twenties. The panic certainly did not help world economies.
But the real irony is that while OPEC was trying to avoid pushing the west
into recession and thus killing demand for its product, it looks as if the
west may have done that to itself by missing indicators of a rapid
economic slowdown. Did we do it to ourselves and the price of oil was
just a bit player?
THE ECONOMY
Housing starts were the news for today. Overall it was up 2.2% to 1.562
million units versus expectations of 1.54 million. On its face, that
seems to fly into the face of an economic slowdown theory. That does not,
however, take into account that the increase was due to multi-family
housing, i.e., apartments. Those are not the types of units that drive
the rest of the economy. Single-family homes are the key, and they fell
0.4% from the previous month. Mortgage rates, while continuing to slide,
are not leading to more housing starts. Indeed, the National Association
of Home Builders expects the market to cool even more despite lower rates
as consumer confidence continues to fall. On the bright side, at least
there is still construction going on and putting people to work. That
helps.
Tomorrow the final GDP revision is out. By this time there should not be
any real change. The key will be the fourth quarter GDP that is out
shortly after the new year. The bigger report tomorrow will be jobless
claims once again. Claims are expected to rise to 340,000 versus last
week's 320,000. This is a leading indicator versus the unemployment
summary that comes out mid-month. It has been trending sharply higher,
and it does have the Fed concerned, just not enough at this point.
THE MARKETS
Ugly got uglier. But, even though the reflex rally we were looking for
today did not materialize, we see some good signs it will do so tomorrow.
That does not mean that any upside we get is a buy and hold rally. Bear
market rallies can be intense, but they usually fail. At this point there
is no sign things have turned: no rate cut, slowing earnings, slowing
economy, not enough fear. Moreover, we have not had a Nasdaq rally last
longer than two consecutive days since September, so any move up is
suspect. Even with that, the VIX hit 36.75 on its high, over the level
that has started recent rallies, 2300 held today on the test, seven days
of brutal selling, and we see many big tech stocks showing doji's on high
volume. Signs of a reflex bounce. If we get more selling in the morning,
that plays into the hands of an intraday reversal.
Overall market stats:
VIX: 35.78; +4.97. 36.75 on the high. This was the spike that we were
looking for that could act as the trigger for the next quasi-rally. These
have given us enough to trade.
Put/Call ratio: 0.80;