On The Verge Of Something Big
Not even Alan
Greenspan could save the day as the major indices
failed to reach their recent trading range highs. Negative comments on
Intel
(
INTC |
Quote |
Chart |
News |
PowerRating) and a decline in
New Home Sales took center stage. For anyone
who actually paid attention to the speech or read the transcript, it is pretty
obvious that Mr. Greenspan cannot or will not make a decisive observation on the
economy strengthening.
Everything spoken had zero conviction,
spoken like most of the CEOs who say they “see things getting better” but have
no evidence to point to. Either he does not know (which is understandable, that
is a pretty tough forecast) or, if he does know, he does not want to let on, for
fear of tanking the bond market, although the Euro dollar market has already
priced in a future rate increase. Additionally, the corporate bond market has
already jacked up rates to corporate borrowers due to the troubles of
Enron, K-Mart,
Solectron, Nextel,
etc.  Â
The fact is, the only thing
holding the economy together at this point in time is housing and retail sales.
Any up-tick in interest rates would surely put the hammer down on the current
spending rate and perhaps the fragile economy. I suspect that Greenspan knows
full well that the recent spending binge has been based on refinancing
activity. Given that there is virtually no savings rate in this country, where
else is the money coming from? While one could argue that the raising of short
rates would bring down long rates and consequently mortgage rates by virtue of a
process known as “rolling down the yield curve,” that remains to be seen.
(For an explanation of rolling down the yield curve, please
refer to Bill Gross’ February Commentary at
www.pimco.com.)
One other news observation before I
get on to today’s session. There have been a few news stories circulating about
how Japanese officials are contemplating restrictions on short-selling. One
comment even went so far as to blame the recent 18-year low in the Nikkei on
short-sellers. This is a joke and also a reason for concern. If, and I mean
if, our markets were ever to experience anything close to what the Nikkei
has gone through, you can bet that this same nonsense will appear here. When
people are backed into a corner, they always look for someone to blame. This is
a development that bears watching.
In any event, trading was again wild,
yet again, the upside moves were sluggish and for the most part I sat on the
sidelines yet again, waiting for the far more lucrative sell-offs. Until
something gives in the way of price action, this will continue to be my
approach, as well as good old fashioned tape-reading. The market does feel as if
it is on the verge of something big, only time will tell.
Looking at some longer-term setups, I
will refer back to a couple of stocks noted in
previous columns, Intel
(
INTC |
Quote |
Chart |
News |
PowerRating) and
Auto Zone
(
AZO |
Quote |
Chart |
News |
PowerRating). Both charts on their
daily and hourly charts look vulnerable. If the market were to begin a test of
the recent lows, these stocks may have a nice pop to the downside.
Key Technical
Numbers: (futures)
S&Ps |
Nasdaq |
| 1154 | 1484-86 |
| 1134 | 1452-53 |
| 1128-30 | 1435 |
| 1118-22 (key resistance) | 1425 (key resistance) |
| 1111-12 | 1418-21 |
| 1105-6 (confluence) | 1395-96 |
| 1102.6Â | 1376 |
| 1089 | 1364 (key support) |
| 1085 (key support) | 1329-36 |
| 1076 (key support) | 1313 |
| 1059-61 | 1272 |
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As always, feel free to send me
your comments and questions. See you in
TradersWire.
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