Typical Bear Market Action
Gary Kaltbaum is an investment advisor with over 18 years experience, and a Fox News Channel Business Contributor. Gary is the author of The Investors Edge. Mr. Kaltbaum is also the host of the nationally syndicated radio show “Investors Edge” on over 50 radio stations. Gary is also editor and publisher of “Gary Kaltbaum’s Trendwatch”… a weekly and monthly technical analysis research report for the institutional investor. If you would like a free trial to Gary’s Daily Market Alerts click here or call 888.484.8220 ext. 1.
OK… when I was in college, I made some bad bets on baseball games… and could not afford to pay… so what did I do? I went to a pawn shop with some stuff to pay off my bet… and hoped I could come up with the money to get my stuff back. The fed is now offering to swap crappy mortgage paper for Treasury bills so the CDO/CMO/CDS/ABC/123 holders can decide over the next 28 days or more as to what do do with their stuff that is not only under water but margined 20-30x actual equity. So… we have funds that margined stuff 20-30x equity and we have lenders who lent out that margin… who now want to be paid back. In other words, everyone at this party is a bunch of nuts. And what does the fed do? They reward the nuts.The fed is a glorified pawn shop.
Did I actually here that Chris Cox… the head of the SEC… state to reporters that Bear Stearns’ liquidity is up to snuff? Am I crazy to ask the question… why the heck is the top regulator in the country playing attorney for a company he is supposed to oversee? Why am I the only one posing this question? I bring this up because at exactly the time this was reported, the market turned on the afterburners and BSC… which was down $7… reversed. This is not the job of the SEC… unless they just want to start acting like Fitch, Moody’s and S&P.
This continues to be a nuthouse. I don’t think there is enough straightjackets in Belleview for all the players involved in this mess. Why do these people insist on interfering in free markets? Why are crooks who took ridiculous risk and reaped billions off this fantasy… now being saved?
Now onto more important things…
The market exploded off the fed news. Let me get your feet back on the ground first. The DOW just dropped 1000 points in 8 days… so it is normal to bounce… and bounce violently… but again, and amazingly, the first day off a low… the bulls are out calling ANOTHER bottom. They never learn! The next thought has to do with a phrase I coined in the last bear market… BEAR MARKET RALLIES ARE SHARP, QUICK, NOISY. MAKE YOU FEEL GOOD. SUCK YOU IN… AND BURY YOU SOON AFTER. For me, a day like Tuesday fits right in. You want facts? Here are the facts:
Top 10 Largest Point Increases in the NASDAQ Composite Index
|
Date
|
Point Change
|
|
01/03/2001
|
324.83
|
|
12/05/2000
|
274.05
|
|
04/18/2000
|
254.41
|
|
05/30/2000
|
254.37
|
|
10/19/2000
|
247.04
|
|
10/13/2000
|
242.09
|
|
06/02/2000
|
230.88
|
|
04/25/2000
|
228.75
|
|
04/17/2000
|
217.87
|
|
06/01/2000
|
181.59
|
As of Market Close on 03/10/2008
The top 10 largest point increases for the NASDAQ occurred in the last bear market.
Top 10 Largest Percent Increases in the NASDAQ Composite Index
|
Date
|
Point Change
|
|
01/03/2001
|
14.17%
|
|
12/05/2000
|
10.48%
|
|
04/05/2001
|
8.92%
|
|
04/18/2001
|
8.12%
|
|
05/30/2000
|
7.94%
|
|
10/13/2000
|
7.87%
|
|
10/19/2000
|
7.79%
|
|
05/08/2002
|
7.78%
|
|
12/22/2000
|
7.56%
|
|
10/21/1987
|
7.34%
|
As of Market Close on 03/10/2008
9 out of 10 largest percent increases for the NASDAQ occurred in the last bear market.
These are facts… not opinions. Before getting all crazy, please let the market prove itself. If you think one day’s action does the job, I have some condos for sale in Miami for you to look at.
I will now be looking for a confirming follow through day starting on Friday. Even if one occurs, there is just no leadership. A smattering of OIL, GOLD, SILVER and now a few wide and loose trading COMMODITIES… and that’s it. There is no chance of sustained rallies without clear and concise leadership.If this is meaningful, it will take time.
My other thought is about the other recent big days… all occurring because of fed action and all failing miserably. Please look at the action from August 16-17, September 18, January 23 and now yesterday. I also make note of November 28th… another Fed pump… where the DOW rallied 300 and S&P 40.
Again, these are all facts… not opinions… that should give pause. I have no bias. I don’t care if the market goes up or down… but I am 100% about the study of the characteristics of bull and bear markets… and know one day does not change things.