The Hump Day Hither
By Todd Harrison Feb 25, 2004 8:49 am
Good morning and welcome to the salty salmon. With yesterday's spew now in the rear view, the critters sat down for a Hump Day review. The debate on their plate simply couldn't wait (the chatter's too great in the Minxy estate) so rather than flake on the state of the tape, they gathered (just now) for a breakfast escape. Over a bevy of Egg Minymuffins, bagels, shmear and whitefish (don't ask), they spewed on the news. It went a bit like this:
Boo: (mouth full of fish) I'm tellin ya, the NASDAQ has been down the last five weeks and I'm still not gettin' any lovin'. This has got to be the quietest correction of all-time!
Daisy: Maybe you'd get lucky once in a while if you chewed with your mouth closed.
Snapper: And if you're that hard up, I'll be happy to give ya a squeeze! (smiles) Makes sense, right? I've got NDX 1450 support below, the Nazz stochastics are inching closer to a buy signal, people negative (again) and we're basing under S&P 1160. Gor-geous!
Hoofy: Yeah, if big technical levels (NDX 1450 or S&P 1160) typically self-fulfill the first coupla times, we should buy ourselves some time (among other things) down here. Think about it, the NDX has only tested support twice while the S&P supply is being digested (tested 8 times). Somebody's goin' to Sizzler! (gives Daisy a wink).
Boo: Sizzler? I don't even know her!
Sammy: (clearing his throat and looking at Snapper) I'm usually objective when it comes to this stuff but I'm not sure I agree with you on this one. Yes, there's solid support here for the Nazz but we HAVE broken the February lows. That officially makes this a lower low (after the lower high) and some people would call that the start of a new trend. And I unequivocally disagree that people are negative--the volatility measures have barely budged (no fear) and sentiment remains near historic highs--bulls came in at 60.2 (vs. 59.2) and the bears are a paltry 17.4 (vs. 17.3) Yowza! Stochastics? They're a ways away from even giving a buy signal--and that's not even taking into account the potential for pretzel twisting (the way it did through January).
Boo: Yeah, what he said! And anyway, big declines always occur when the market is oversold (not overbought)--particularly after it's been overbought for so long. (stopping to make sure that made sense) We haven't seen the put/call ratio this low after a 7% Nazz decline in over a year. What's that mean? Everyone believes the hype and nobody is buying protection!
Hoofy: Until proven otherwise, Boo, dips are made to be bought...right? I've heard these arguments for almost a year and each time, the market made a higher high. Just keep an eye on corporate spreads--until they widen considerably (indicating the "un-easing" of money), the corrective equity phases should be relatively muted.
Boo: Perhaps--but we've now experienced a series of dips that haven't snapped back and patience will dissolve (along with prices) if the turtle doesn't cut the rug soon. And lemme say this--while the technical metric may be shifting course (non-confirmations and divergences), the key, in my view, is psychology. Yesterday's consumer confidence highlighted the growing concern about the labor lethargy and productivity or not...globalization or not...people are starting to get peeved. That may not matter in a normal world but in the midst of a psychology bubble, it is a potential disaster.
Daisy: Chill out, chicken little--it's a bit soon for the blood, frogs, vermin, locust speech. We know what to watch for--breadth has been a great read, the financials and semis are sector tells, biotechs, retail, the cyclicals are peripheral tells and energy, pharma, the metals, bonds, the dollar, Europe and crude are other items to monitor. And later, if time permits, we can talk about the dance that's evolving between Elmer and Franklin Raines. This one's gonna get juicy!
With that--and as the opening bell ticked ever closer, the menagerie finished up their feast and readied for the beast. It was Hump Day in critterville and the Ollie's Diner began to empty as critters scurried to their offices. As the bill arrived and Hoofy reached for it (out of habit), young Boo snatched it off the table and tossed down a $20. "I've got this one," he said with a sly smile, "it's been a long time since I've had some jingle in my jeans and it's about time I started pulling my own weight."
Good luck today.
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