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Did the Bounce Work?


Many stocks still closed lower on the day and frankly what is disturbing is that the market is selling the wrong stuff down the hardest...

Well, we got our bounce yesterday. But it was a bounce after some eerily extreme panicky selling which I believe was primarily caused by Poole's remarks that were posted after the close August 15.

After seeing the last hour's action August 15, and hearing about Poole's comments after the close, I'm still wondering if some of this story was already on the floors or in the markets that day. But I've been unable to confirm if any of his interview was released during that day's late sell-off.

It is also my belief that before hearing Mr. Poole's comments, we were set up for a strong bounce yesterday after the liquidation selling of the prior couple days. Again, we did get a bounce (a strong one), but instead of producing a solid day of gains, we just greatly reduced large long side losses.

Many stocks still closed lower on the day and frankly what is disturbing is that the market is selling the wrong stuff down the hardest, meaning some of the companies with the strongest balance sheets, the most cash per share and strong growth fundies are still getting hit as hard or harder than the market. Usually, even in terrible markets (like 2001-2002), companies with these traits will hold or drop less than the their respective index or sector.

Interestingly, after hearing the comments from Poole, I am reminded of the infamous "8th inning" comments some time ago by Fed Gov. Fisher. For those that don't remember this, the comment occurred in mid-2005. And the market rallied hard on these comments. Shortly after Fisher's statement, the Fed raised rates and continued to raise rates for almost another full year.

Can we get a similar but opposite effect now? Well, just as I was finishing this piece I heard the talking head behind me on CNBC say the Fed just cut the rate at the "discount window". I would rather just see the Fed cut rates and stop the madness, however, this shows it is aware and will do something.

Again, as stated previously, I have felt the Fed is behind the curve and the credit, real estate and recent economic numbers seem to more than confirm that effect. Hopefully, this is a move in the right direction to restore stock prices more closely to reflect fundamentals.
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No positions in stocks mentioned.

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