Not The Weakest Of Pullbacks

I mentioned this morning that the best thing the market could do right now would be to pull back with weak internals.  Well, it didn’t do that.  For most of the day we were down around 200 points and then sold off into the close.  A sell off wasn’t shocking given the big moves of Thursday & Friday.  But, almost 400 points doesn’t really exude a lot of confidence by investors.  Now, you could argue that those people who have been wanting to sell were able to do so with higher prices from the last two days.  But, that’s the point.  Those people have been wanting to sell after every rally this year.  Too much supply.  It still exists.  And, not enough demand.  I thought over the weekend that the parties involved in the various bailout packages would give us something to cheer about come Monday morning.  Give us something we didn’t see coming.  Please.  Surely this is too big of a crisis to bicker over what should go in the packages, right?  Wrong.  Monday morning comes and we hear the Democrats want this in the package.  The Republicans want this in the package.  They should have come up with some creative package that would have blindsided us and surprised investors to get even more confidence back in.  They didn’t do that.  That’s a missed opportunity.  This market has to build on itself.  Today was a let down.

The good news is today wasn’t nearly as bad as Friday was good.  There was much weaker volume today than on the up days.  Today wasn’t a 90% downside volume day.  And, there were a lot of stocks up today in various spots.  Materials stocks held up very well for example.  It didn’t hurt that oil had its biggest one day jump ever.  That helped energy stocks, etc.

I’m not giving up on this market just yet.  The good news is that there is still a ton of fear.  And, there are plenty of people doubting that the market can rally.  Those are both contrarian indicators that are bullish.  But, my leash is short.  Markets that are oversold (which this one is) can stay oversold for a long time.  I mentioned this morning that the volatility will remain high and whipsaw risk will be high as well.  So, don’t panic and sell everything tomorrow morning just to see the afternoon give us a huge rally.  We’ve seen that before.

Future are up a little after hours.  We’ll see what tomorrow brings.

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1 Response to “Not The Weakest Of Pullbacks”


  1. 1 Jason September 22, 2008 at 11:16 pm

    Karl, I can understand your thesis that the pullback would have been short-term sellers taking profits or old holders that finally took a deep breath and escaped.

    How does the fall of the dollar fit there? Typically I’d characterize the institutional investors that are moving currencies more savvy and sophisticated. It seems that it was more than Mom and Pop selling shares, would you say that it was foreigners selling shares and repatriating $ to home currencies or at least the Euro and Swiss Franc?

    As a second thought, would you simply describe the action as the inverse of the oil move. Suggesting that as oil goes, the $ will go the other direction and thus taking equities with it?

    Jason


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