----- Original Message -----
From: Mark Jones <[EMAIL PROTECTED]>
To: crl <[EMAIL PROTECTED]>
Sent: Friday, January 05, 2001 5:30 AM
Subject: [CrashList] what's up on Wall St?
market Summary January 04, 2001
Posted Daily Between 5 and 6:30 PM EST
by Lance Lewis
Reversal Day?
Asia was mixed last night as Hong Kong rose 4 percent and Japan fell a percent.
Europe was up a percent in front of our open. The futures traded higher early this
morning but slipped as we got closer to the open. We opened flat and basically
drifted sideways most of the day as it looked to me like there was enormous
distribution taking place. In the last 3 hours or so we started slowly leaking to
the downside and closed near our lows. Volume was HUGE (2.1 bil on the NYSE and 2.6
bil on the Naz.) Breadth was slightly positive on both casinos. Big winners were in
the airlines as the XAL rose 4 percent. Big losers were in the biotechs as the BTK
fell 7 percent.
Early on, tech was mixed. We had a couple warnings last night from various tech
shares, and they were trashed on the news but there was no real collateral damage
that I could see. As the day wore on, the selling seemed to pick up and big rallies
everywhere had turned into losses with many shares ending on their lows of the day.
Once again, today was complete and total chaos with no real theme that I could
detect. It continues to be about general liquidation. Financials on the other hand
had some things to say. The BKX banking index closed up a percent after trading
higher early on. The XBD brokerage index gapped up several percent but retreated to
close up only a percent, near the low for the day. Credit insurers were crushed for
between 5 and 7 percent, presumably on the realization that EIX and PCG will soon be
filing for bankruptcy (more on that later.) FNM and FRE were also busted for 5
percent. Clearly, there is some sort of derivative problem out there, which could
very well have been what drove Uncle Al to hit the panic button yesterday. The easy
answer is that it is related to the CA utilities that are headed for Ch7, but thats
been out there for so long that I find it hard to believe thats the only reason we
re seeing this selling. Its possible, as we have seen in tech, that you had to put
things up in neon in order for the market to act on it. Today, that neon sign was
several brokerage firms saying "gee, we think these utilities might go bust." Recall
we discussed this very issue almost a month ago. So, who knows whether there is
another big blowup out there or not, but I tend to think there most definitely is.
Speaking of utilities, they were smashed today. Not only did PCG and EIX break to
new lows, but the Dow Utilities continued their 3-day crash from their recent peak,
falling another 6 percent. Strangely, this didnt seem to bother anybody. All I saw
talk of was the glorious rate cut and how we were headed for the moon. It is truly a
bizarre environment. Elsewhere, the Dow Transports were in melt-up mode, rallying 4
percent. Why you ask? More "Fed has saved the day" believers thinking transports are
the place to be I suppose. That and there were likely some shorts that were blown
out. The drugs and consumer shares continued to collapse as people sold those to buy
tech, with both the DRG and CMR falling around 3 percent. I dont think theres
anything to draw from these wild moves at the moment. Its just another sign of a
distressed marketplace. The market is in the midst of a derivative dislocation as
the liquidation of the market continues to cause problems. Uncle Als rate cut
yesterday may have in fact made things worse by simply blowing out more participants
when they were caught the wrong way when Al tried to slap a band-aid on the market.
Today was simply once again symptomatic of a deeply sick market as far as Im
concerned.
Oil rose 14 cents on more rumblings out of OPEC that they will cut production. The
XOI fell a percent, and the OSX fell 2 percent. Gold fell 90 cents. The XAU fell a
percent, and the pure gold index, the HUI, rose a percent. The dollar was hammered
as the US dollar index fell more than a percent, wiping out virtually all of
yesterdays rate cut gain. The ECB chose to take no action this morning, and the
euro rallied sharply on the news back up over 95 cents after rallying some overnight
as well. The yen was the one currency to trade lower against the dollar as it broke
to a fresh low for the move. More than likely, Japan has some derivative problems of
her own. On her first trading day of the year last night, they couldnt even muster
a positive day after our virtual melt-up over here. The Nikkei is not too far from
breaking its 1998 lows, and I think we may see that soon. Treasuries bounced back a
little after yesterdays drubbing as the 10yr fell in yield to 5.04%.
Tomorrows trading is hugely important I think. Todays epic volume and close near
the lows after trading higher earlier in the day could represent a massive reversal
that is setting up a collapse tomorrow and next week. Then again, the bulls will
likely say that it was the accumulation phase before tomorrows melt-up. Whichever
way we go tomorrow, it will likely be a very large move I think. The unemployment
number is in the morning, and I think it will be interpreted negatively no matter
what it is. If it shows a big fall in employment, they will say Al must have
panicked about something else because this number didnt warrant a cut. If the
number shows a large jump in unemployment, theyll probably say that the economy is
slowing even faster than they imagined. Wage data could also be key. It doesnt
really matter what the data is though. As always, its only the reaction that
matters. If stocks and the dollar are sold hard and we wipe out Wed.s rally, which
I think is likely, we could well be on our way to a complete disaster next week. The
bulls must take us higher tomorrow, or face certain extinction in my opinion. The
forces of liquidation continue to push on stocks and the currency, and the bond
market has likely now topped out as well, which means it will be under liquidation
now too. The best the bulls can hope for is another sharp short squeeze to buy
themselves some more time in order to try and put Humpty Dumpty back together again.
I dont think theyre going to get it, but well see. Crash helmets remain on
www.prudentbear.com
_______________________________________________
Crashlist resources: http://website.lineone.net/~resource_base
To change your options or unsubscribe go to:
http://lists.wwpublish.com/mailman/listinfo/crashlist
