Goldman Says Market Oversold
Goldman Says Market Oversold
(Translation: Please buy something so we can get out!)
The futures are a shade higher at the moment. GDP was a slight
positive, coming in at a higher-than-expected 5.8% vs. the 5.0% consensus
expectations. The deflator came in at a lower-than-expected .8% vs.
expectations of 1.5%. Digging beneath the headline numbers, however, we find
that inventories contributed to more than half of the increase as final sales
growth came in at 2.6%, and business investment fell 5.7%. Inventory rebuilding
will only be a short-term pop if they can’t sell the stuff.
Since the American stock market is basically a confidence game, the more
important report this morning will be the University of Michigan Sentiment
numbers due at 8:45 CDT. Expectations are for a 94.6 reading. I would not be
surprised to see it come in lower, as the conflict in the Middle East is finally
showing up on the radar of the average American, and the situation is truly a
The VIX gained .37 to 23.05, the VXN was unchanged at 40.18, but had traded up
to 42.51 intraday before settling near the low. The QQV also traded much higher
intraday, up to 35.62 before rolling over to close at 34.21, up .21 on the day.
The market is slightly oversold here, and I would not be shocked by a
rally. Also, as Bill Fleckenstein notes in his column in realmoney.com, we are entering the "dead period" following
earnings when the pumpers and cheerleaders tend to operate. That being said, I
think the market over the last few weeks has revealed what it really is (a bear)
and we have to be prepared to be scale buyers of puts on every rally for the
I think it is interesting that the "second half" recovery stories are
starting to be floated now that the "second quarter" recovery has been
flushed down the toilet. Of course, these are the same people that were pushing
the "second half" recovery story last year. Will the economy recover?
I don’t know. But the stock market usually precedes the economy, and it sure
isn’t acting like it is expecting a big recovery.
Trade Updates (4/24/02)
Working Orders (Old Recommendations)
(Note: What you are doing is selling your
long May 60 calls to close, buying half as many May 55 calls to open, and paying
$.65 for the privilege). Cancel this trade if APC trades below $53.00.
New Actions (New Recommendations)
On The Horizon…
Broker/Dealer shorts on a bounce.
Recap of open trades:
HAL — Long the July 17.5 buy-write at $14.50 (50%).
Call Spread Positions
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