Dow 12,000 Now A Memory

RichardSchwartz — Thu, 26 Jun 2008 13:45:00 GMT

Thursday, June 26^th, 2008: Written 6:30 a.m. EST Going to find our “way to San Jose” next week, on vacation, so I’m been auditioning books for the plane rides. One coming along is Hamish McRae’s THE WORLD IN 2020. I previewed it and got caught up by his writing, the history he provides and his insights and conclusions. Anyway I’m in Monday am so one last missive then and next Friday is the 4^th of July so I’m only missing 3 letters.

UPDATE ON THE STOCK MARKET. After any break to new lows, one can generally expect a reflex rally. So after Tuesday’s confirming lows in numerous key US indices, “telling” us the near term stock market trend remains down, it wasn’t surprising to see the stocks up from the get-go yesterday, tracking a prior bounce in Europe. Later yesterday, the Federal Reserve’s 2:15 p.m. “no change” interest rate announcement didn’t change anything. Still, we had the normal late day sell off, common these days. As I see it, the mornings recently have been characterized by bulls rallying the market after the usual opening sell off runs its course, buyers stepping in after sellers temporarily exhaust themselves, just when a little buying can be very effective. Buyers looking to support their stance that things are and will be all right. Then these, now summer, afternoons are characterized by late day sell offs as large, institutional investors sell into the strength, lightening their heavy loads of stocks, as the bear camp grows slowly, but ever larger.

Schwartz View: We’re now very likely morphing into a steady and sustained stock market decline, i.e. a firmly entrenched bear market. Take a look around yourself, it could be sneaking up on you, you don’t want to be missing it. This bear is of the deceptive nature, not outright grizzly, not yet. Take the Dow Jones Industrials, “the Dow,” for example. Take a peek. We’re now below Dow 12,000 which we’ve only been below twice before now since the subprime implosion last summer, and then only briefly. First time down, the Dow closed below 12,000 for just one day, at 11,971 on January 22^nd, before jumping back above 12,000. Then the Dow closed below 12,000 on four days in mid-March, surrounding nervous weekends. The Dow closed at 11,893 on Friday, March 7^th and at 11,740 on the following Monday, March 10^th. Then after watching Bear Stearns rapidly fall apart the next week, from, oh, $70.08 down to $30.00 the Dow fiddled slightly above 12,000 for three days before closing again below its psychologically key, big Round Number on Friday, March 14^th at 11,951 and again the following Monday, March 17^th at 11,972. That was it. Since then its held above Dow 12,000 … until this past week. This third time down (may be the charm) the Dow closed below 12,000 last Friday and has traded below it for four straight days. To me this is a sign of more admittance and acknowledgement that things are getting worse not better, a sign of resignation. That likely a new and second leg down in stock prices has begun.

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Dow 12,000 Now A Memory