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URL: http://www.prudentbear.com/bearthoughts.htm
Market Summary December 8, 2000
Posted Daily Between 5 and 6:30 PM EST
by Lance Lewis
Bull Trap Is Sprung
Asia was mixed last night as Japan was unchanged and Hong Kong was up
a percent. Europe was up about a percent as we rolled around to the
US casino's open. The futures were blazing to the upside ahead of the
open. The NDX futures were actually lock-limit up as everyone was
just dying to have a party because hey, haven't you heard? INTC has
hit bottom, and all the bad news is priced in! Yeehaa! The
unemployment number was largely ignored by stocks, but the bonds were
hit. We had a huge gap up at the open then had a bit of a selloff and
then began to gradually rally again to new highs for the day. Around
2:30 EST, Judges Lewis & Clark (no, no relation) ruled against the
Gore faction, and the market went straight up… hung there a bit like
a ball that's been thrown into the air… and then reversed to give it
all back. The remainder of the day was spent flopping around trying
to get back to that high but we never made it. Then the REAL news hit
right at the close. The FL Supreme Court announced that there were to
be recounts statewide of all disputed ballots. This means not only do
we not know who will be President, but there's no telling how long it
will take to recount all the ballots. On this bit of news, the bottom
fell out of the futures in the post-market session. After being up
around 40 points, the S&Ps collapsed end down a couple points as fast
as you could say "Bull Trap." The NDX futures fell similarly. The
S&Ps ended back at the lows of last night's session immediately after
the INTC warning, and the NDX futures were just off those lows. So we
essentially entirely retraced the hope rally that we had today,
trapping anybody who decided they would ignore what is going on in
the real world and shrug their shoulders and buy spin. Volume was
good once again (1.3 bil on the NYSE and 2.1 bil on the Naz.) Breadth
was 2 to 1 positive on the NYSE and just shy of 3 to 1 negative on
the Naz. Big winners were in the semis as the SOX rose 12 percent.
Big losers were in the golds as the HUI fell a percent.
Everybody knows by now that INTC warned last night. The funny part is
that the bulls tried to pretend like it didn't happen. You know… it's
all priced in, the stock has bottomed, chart looks OK, etc. INTC rose
5 percent on the news but ended well off its highs in one of the
grandest displays of a hope rally I have ever seen. The rest of tech
was blazing to the upside as well because after all, INTC went up on
bad news so that means we have finally hit the elusive bottom that we
have all been talking about day in and day out for the past 4 months.
Almost everything was up. So, let's concentrate on the ones that were
down. SUNW had problems right from the early going after a newsletter
writer raised concerns over accounting irregularities. Clearly SUNW
is going to have problems as more and more dot-bombs go the way of
the dodo. Let's not forget all those used servers that are hitting
the market too when these companies file Ch. 7. SUNW ended down 9
percent on the day on fairly large volume. CDW Computer (CDWC), which
is a direct marketer of PCs, warned last night also. The stock
collapsed 25 percent. CDWC stated ``Currently, we are facing slower-
than-expected demand due to economic uncertainties which we believe
is an industry-wide phenomenon, [and] these economic uncertainties
make us cautious about 2001…" So, that's just another piece to the PC
debacle puzzle that a small child can put together by now as it has
become so obvious. CPQ reacted a little to that news by trading up
initially but finishing on the low of the day and up only a touch. IM
also reacted to the news by falling 12 percent. The rest of PC-land
in the larger cap stocks appeared to ignore the news. There were a
few other stocks here and there that were weak like YHOO, which spent
most of the day down a couple on rumored margin related selling, and
NOK, which was down around a percent, but most everything else was
blazing to the upside. Over in financials, things were also green.
The BKX banking index rose 2 percent. XBD brokerage index soared 8
percent. The big boy, GE, rose 3 percent. Retail stocks were mixed.
WMT kinda stuck out in the red, losing 1 percent.
Oil fell 91 cents. The XOI rose a touch, and the OSX rose 2 percent.
Gold fell a buck. The XAU rose a percent (a lot of that was the ugly
duckling of the XAU, Phelps Dode (PD) –a copper producer- which rose
5 percent.) The pure gold index, the HUI, fell a percent. The dollar
rose a touch against most currencies. The euro, specifically, fell
half a penny. Treasuries slipped a little after getting a look at the
unemployment report but recovered most of their losses.
The headline unemployment number came in about as expected but
average hourly earnings, rose 0.4 percent to $13.94, and are up 4
percent over the past 12 months, the fastest wage growth in nearly
two years. So, we're starting to slowly see more signs in the wage
department that hint at some inflation out there (if it wasn't
already obvious in energy prices.) It's nuts for people to think we
can go to every store window in town and see help wanted signs and
yet wages not move higher. Speaking of wage inflation, the Senate
voted yesterday to boosts Uncle Al's pay 11% to $157,000 a year -- up
from $141,300. That's understandable. After all, Greenspan is about
as productive a worker as you can find. I can't think of anyone else
who can print more money in less time at the drop of a hat.
Traders' commitments were released today and show the commercial
traders in the S&Ps (the "smart money") now net short (yes, you
guessed it...) another new record of 86,000 spoos. Gold's commitments
slipped somewhat as commercials again reduced their net long position
slightly, but still remain long the yellow metal.
Today's decision by the FL Supreme Court is enormously damaging
psychologically. Psychology is an extremely powerful force, just as
we saw it was today as we rallied on the pure hope and good feeling
that "all the bad news was priced in." When that psychology turns
negative in an environment that is deteriorating rapidly for stocks,
things can be explosive. So, while I have said all along that this
election circus is irrelevant, the psycholigcal damage this will do
could be enormous. With today's wild turn of events late in the day,
the S&P futures have closed near their lows of the week and below the
low of the jam-job on Tuesday. The dollar also continues to sit on
its own cliff edge as the US dollar index ended near the lows of the
week as well. This all sets up a real possibility of a real disaster
next week as the boys have apparently failed to flip the derivative
book to the buy side. Unless the bulls can muster the troops yet
again, we may just see an unwinding of next Friday's option
expiration to the downside. Yesterday, I said we were on the edge of
the abyss. With today's late move, we have one foot hanging in the
air over the abyss, and one teetering on the edge. Watch out below if
the wind blows too hard. Next week will be a wild week to be sure…
Where Are They Now?
Lastly, we're going to start a new section in the (Bear) Market
Summary on Fridays called "Where Are They Now?" In the spirit of VH-1
Music Television's "Where Are They Now" episodes that track down
former famous rock stars to find out what in the world happened to
them after the dream died, we're going to look at some of the high
fliers of the last couple years to find out what in the world ever
became of them. Today we're going to look at Internet incubator CMGI.
CMGI topped out around $160 a share in early January of 2000 with a a
market cap of around $51 billion. They had never made a dime of
profit and still haven't. After a rough Q1 of 2000 where it lost
about 60 percent, CMGI continued its decline this Summer and is now
down some 93 percent. If CMGI were a former rock star, they'd be
living in a trailer park and playing the local bars. Next week, we'll
take a look at some Internet companies that just sprung to life a
year ago with wild ideas, high spirits, and even nuttier valuations,
but their wild and crazy (and rather unprofitable) ways drove them to
an untimely death, unfortunately taking their shareholders with them.
You can E-mail me below, and I enjoy hearing from both bulls and bears
bear--mail@xxxxxxxx
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