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MARKETS:
Yesterdays hopes were wrongly placed obviously. We retraced the whole
recovery, with lower volume on the Nasdaq and comparable
volume in the other indices. Only the Nasdaq and DAX are below April
lows in the US, while all other western indices are still above
these. The VIX Volatility index in the US is finally starting to rise.
Basically the market is locked in a stalemate between suppliers refusing
to sell and potential buyers refusing to step in. Typically this ends in
a sharp painful drop in favor of the cash holders. However the way
this market has behaved so far, I wouldn't bank on it either.
OUTLOOK: In case the Nasdaq does visit its lower trendlines or even its
October levels, the positive thing would be that consumption
would definitely take it on the chin, and we might not need many more
rate raises if at all to "cool" things, as we might even get freezing
weather pretty soon at this speed. Thursdays GNP figure will not help as
it wil reflect the red hot Q1, but May should have witnessed a
significant reduction is spending by the formerly well to do.
RETROSPECTIVE: To give some perspective on the past bear markets:
NDX 83-84: -39.6%
SP 83-84: -28.5%
NDX crash 87 - 39.9%
SP crash87: - 35.9%
DAX crash87: - 40.6%
NDX gulf war: - 32.9%
SP gulf war: - 20.3%
DAX gulf war: -33.7%
NDX 94crisis: -15.9%
SP 94crisis: -9.7%
DAX 94crisis: -17.2%
NDX Asia98: -28.4%
SP Asia98: -22.4%
DAX Asia98: -38.6%
NDX bubble00: - 37.2%
SP bubble00: - 13.7%
DAX bubble00: -16.4%
As can be infered, the Nasdaq is within the usual worst declines in a
long term bull market. Beyond that, we would get into Japanese style
drops:
NKY crash87: -28.4%
NKY 89-92: - 64.4%
NKY 96-98: - 57.2%
QUOTE OF THE DAY:
It is always darkest just before dawn...
(old saying)
Best to all,
Gwenn
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