Blindsided
Did
the Federal Reserve finally succumb to the incessant whining on Wall
Street or is there something more serious taking place here? By cutting interest
rates by 50 basis points with only three weeks remaining until the regularly
scheduled meeting and with Greenspan having expounded to the World during his
Congressional testimony that “the Fed prefers to act within the timeframes
of its regularly scheduled meetings unless there are extenuating circumstances
which warrant intra-meeting action,” we can only venture to guess why.Â
Something I have stated many times is that the market is fairly priced for a
nano-second every year. A question you continually need to ask yourself when
evaluating the condition of the market is, “Is the market priced for
perfection right now or disaster?”Â
At the present time, it appears that
with new money rushing back into technology and other Dow component stocks and
with brokerage houses continuing to increase their equity exposures that the
mass psychology has now shifted overwhelmingly to the “you can’t hurt us
now, we’re bulletproof” mind-set. It certainly appears that the market
manipulation and vapor trail to the upside the past few weeks that I have been
mentioning was due to institutions and smart money who are in “the
know” getting positioned for this event. Forget about the earnings reports
and economic numbers we have seen, they are irrelevant. This was “the
trade” they were betting on; the surprise rate cut. If you saw it coming
and got positioned for it, congratulations. If you were like me and were totally
shocked by the event, you are probably in the majority.
With aftermarket trading continuing to the upside on the heels of a positively
spun [ IBM|IBM] earnings announcement as well as an extremely creative [
AAPL|AAPL] number, it appears the party will continue tomorrow morning. With the
exception of the retail sector which exploded to the upside today due to the
logic that cheaper credit will make people buy more stuff (if they have any more
room left on their credit cards, that is), most of the defensive groups took it
on the chin. Some of the worst performing sectors today were healthcare, oil
drillers, and pharmaceuticals.
With the Nasdaq already hitting its head on major resistance with the
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trading at around 47 aftermarket and the Nasdaq 100 [ NDX|NDX] nearing 1900, it
seems as though the least risky trade at this juncture would be to trade the
money outflow from “safe haven” sectors that really looked pronounced
today.
Interesting how Dan Niles can bash
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overvalued when Tenet Healthcare
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an [ ADVP|ADVP] that is trading at a 67 multiple. These two plays look great for
continued movement to the downside:
With speculation now
running rampant due to the mass acceptance of a bottom and (get this) the
commencement of a new bull market, I can only comment that the patient appears
to be displaying classic signs of “Post Bubble Disorder.” With market
psychology so overwhelming bullish at present, it appears certain that a ‘buy
the pullback’ scenario will run the show for the next few months (barring some
type of catastrophe…scratch that… barring some type of catastrophe that
cannot possibly be spun as positive for equities).Â
As such, although further
appreciation in growth stocks and the technology sector may not offer much more
upside, the key here is to realize that absolutely no one on the street is being
cautious at the moment and is sick of owning “safe haven” stocks
rather than the
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world. As such, the “safe haven'” mentality may be thrown by the
roadside for a few months as the retail investor looks to make back their losses
by the newly renewed promises of wealth and fast gains provided by the Nasdaq
casino.
Goran