Friday, June 20, 2008

How Now Down Dow?

Elocution lessons aside...
Thursday's dropping oil prices were supposed to be the markets' salvation. We said that the big news on Thursday was that OIL held above $130/bbl for the tenth day in a row not that it fell by $5/bbl intra-day. Today, guess what? Yesterday's 'watershed' intra-daily drop is just that- a drop- a drop in the bucket... and if you bought into it you are today kicking the bucket, or your position is.

The closing DOW is below 12,000 for the first time since March 17th 2008.

Still the 10-Yr note yield is above 4% at 4.19%, not at the 3.34% it carried when the DOW was last below 12,000, making this trip below 12,000 more ominous.

The IMF is forecasting recession in the US (though not in so many words) and the Fed is running around behind the scenes whispering into journalists ears, as it is trying to undo all that talk about maybe tightening.

Maybe tightening? Is that like maybe inflation fighting??
The Fed seems surprised that the markets were so quick to believe it when it talked about shifting risks. I think that while we can give the Bernanke Fed good marks for a lot of things communications is not one of them. The Fed is no Marconi, No Bell. But The Fed did this when markets already were having inflation worries and so to them the warning had resonance... and that reverberated in markets through the yield curve and in Fed funds futures. Over the river and through the woods - even granny got the message. You can't say what you don't mean just to soothe. It may work with children, but not sophisticated markets. That is one lesson that by now should have been learned.

Market Die-Nam-Icks
Markets are tired of being batted to and fro by the Fed and oil prices. Their resilience may finally have been stretched too far. Bye bye 12,000. Bye Bye love. Bye, bye happiness... etc. the Neverly brothers...

She loves me, she loves me not... What? She HATES ME?
Looks like the Dow has settled on the notion of 'Not.' Things are 'not' great and it's 'not' all financial stocks. When 'they' don't buy consumer discretionary stocks or staples its time to throw in the towel. In this case it just could be the baby with the bath water.

Sell 'em all and let God sort 'em out?

2 Much 2 little
Too many negatives are being stacked up by too many different prognosticators and too many markets are too beleaguered to hold onto too much hope. Can the oil market producer/consumer meeting conjure any good news? OPEC already has declared it would not pump more oil (Remember Jakarta! they cry- it was their Alamo. They pumped too much at their Jakarta summit years ago and unglued a tight oil market. Now it's the Edgar Allen Poe strategy...nevermore.)

The Dow: Once 12,000 is gone what's next?

Reminder- not gloating...
Last Saturday in 'Bonds and Stocks Technically Speaking' we made the case for pessimism No point in changing that view now (see this Blog for last Saturday 'Stocks and bonds technically speaking').

So, how now down Dow?

I don't know the answer but they always say this in adventure movies:
JUST don't look down!

1 comment:


The dow jones industrials is now outdated.