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Todd Market Forecast Stock Market Update for the close on Friday
03/16/01
This market has gone far beyond what any reasonable observer would
have expected. It gets oversold, has a one day bounce and gets clobbered
again. Yesterday we mentioned that a lot of the selling could be coming
from Japan. We would like to stay with that theme.
At last reports, Japanese institutions owned a massive $2.2 trillion
in foreign stock and bonds. On April 1, their balance sheets will have
to start showing both domestic and foreign securities at current value
instead of purchase price. This is going to be a shock considering how
much Japanese stocks have fallen.
When institutions decide to unload stock, they don't announce it
and they don't sell all at once. They bleed it into the market
piecemeal. This is probably the reason that every new rally attempt is
met by fresh waves of selling. And of course, this constant selling
begets selling from other sources and causes potential buyers to hold
back.
They aren't selling bonds because debt instruments have been in a
rally phase. Showing them at face value won't be damaging, but stocks
are another matter. Of course earnings warnings have also had a major
effect. The confluence of events has been unusual and devastating and
may well be why none of the old methods for spotting bottoms seems to
work right now.
If we're correct, we could see at least a major trading low at the
end of March. Stay tuned.
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