David Nichols Morning Report
Enviado: 31/1/2003 15:18FRIDAY a.m.
January 31, 2003
Not much to cheer about
by David Nichols
The news flow has now officially achieved "horrible" status. To give you an idea, here's a rundowN of some of the stories I scanned last night and this morning, in no particular order:
-- Japanese stocks were heading for a 20-year low as I went to bed last night.
-- Stock Indexes in Europe are headed for their worst ever decline in January.
-- ABN Amro just initiated the first negative interest-rate loan in Japan, a $125 million loan to Societe Generale and BNP. This means that the borrower has to pay back less than the amount borrowed. Such a corporate recognition of deflation in Japan could have dire consequences, as it shows that corporate Japan is now adopting the same mindset as Japanese consumers.
-- The "January Barometer" for the stock market is getting lots of airtime, which roughly says the following: How goes January, so goes the year. And January has not been good.
-- The U.S. took a crew from the widely-followed Arab channel, Al-Jazeera, through a tour of the aircraft carrier Nimitz, and specifically showed the camera crew our nuclear weaponry -- on active status. Meanwhile, Saddam Hussein puffed on a cigar for an Iraqi camera crew, to fully demonstrate his non-chalance.
It's definitely a nervous world, and the ultimate barometer of consumer confidence and sentiment -- the stock market -- is also decidedly nervous.
Please don't make the mistake of thinking that because the news flow and sentiment already have a decidedly negative cast, an important bottom is moment's away. The crowd is still in the process of being converted into a bearish opinion, and there's nothing saying yet that this process is complete. So far this looks like a decline that is likely to send our sentiment tank all the way to 100% full. It's never a good idea to get in front of that, as the end-stage of these declines is where the real damage occurs.
Yesterday started out as a pullback, and by the end of the day it had turned into another powerful wave of selling. Importantly, the SPX and OEX both closed below the lows reached on Monday, indicating there's now nothing holding back further selling pressure, and a continuation of the decline.
Interestingly, the Nasdaq 100 (and QQQ) have not cratered yet. But it's getting very close to breaking through its last real line of defense -- its obvious long line of support. All the other indices plunged right through their support lines, but the Nasdaq is still holding on.
A break below this line should cause acceleration to the downside, as the last buttress for the market gives way. (Note to options subscribers: it's this breakdown that I'm looking at as a potential trigger for our intial single-stock futures trades.)
As they are reporting in Debka -- available this morning on our web site -- the US is in final preparations for military action in Iraq starting in late February, early March. If this is true, and the final run-up to conflict is going to last another month or so, then the stock market is going to continue to have some major problems. Who wants to step up and call a bottom in this type of environment, in the middle of a vicious bear market?
We would only want to step up and do that if the bearish consensus reaches overwhelming extremes -- and we're not there yet.
January 31, 2003
Not much to cheer about
by David Nichols
The news flow has now officially achieved "horrible" status. To give you an idea, here's a rundowN of some of the stories I scanned last night and this morning, in no particular order:
-- Japanese stocks were heading for a 20-year low as I went to bed last night.
-- Stock Indexes in Europe are headed for their worst ever decline in January.
-- ABN Amro just initiated the first negative interest-rate loan in Japan, a $125 million loan to Societe Generale and BNP. This means that the borrower has to pay back less than the amount borrowed. Such a corporate recognition of deflation in Japan could have dire consequences, as it shows that corporate Japan is now adopting the same mindset as Japanese consumers.
-- The "January Barometer" for the stock market is getting lots of airtime, which roughly says the following: How goes January, so goes the year. And January has not been good.
-- The U.S. took a crew from the widely-followed Arab channel, Al-Jazeera, through a tour of the aircraft carrier Nimitz, and specifically showed the camera crew our nuclear weaponry -- on active status. Meanwhile, Saddam Hussein puffed on a cigar for an Iraqi camera crew, to fully demonstrate his non-chalance.
It's definitely a nervous world, and the ultimate barometer of consumer confidence and sentiment -- the stock market -- is also decidedly nervous.
Please don't make the mistake of thinking that because the news flow and sentiment already have a decidedly negative cast, an important bottom is moment's away. The crowd is still in the process of being converted into a bearish opinion, and there's nothing saying yet that this process is complete. So far this looks like a decline that is likely to send our sentiment tank all the way to 100% full. It's never a good idea to get in front of that, as the end-stage of these declines is where the real damage occurs.
Yesterday started out as a pullback, and by the end of the day it had turned into another powerful wave of selling. Importantly, the SPX and OEX both closed below the lows reached on Monday, indicating there's now nothing holding back further selling pressure, and a continuation of the decline.
Interestingly, the Nasdaq 100 (and QQQ) have not cratered yet. But it's getting very close to breaking through its last real line of defense -- its obvious long line of support. All the other indices plunged right through their support lines, but the Nasdaq is still holding on.
A break below this line should cause acceleration to the downside, as the last buttress for the market gives way. (Note to options subscribers: it's this breakdown that I'm looking at as a potential trigger for our intial single-stock futures trades.)
As they are reporting in Debka -- available this morning on our web site -- the US is in final preparations for military action in Iraq starting in late February, early March. If this is true, and the final run-up to conflict is going to last another month or so, then the stock market is going to continue to have some major problems. Who wants to step up and call a bottom in this type of environment, in the middle of a vicious bear market?
We would only want to step up and do that if the bearish consensus reaches overwhelming extremes -- and we're not there yet.