12/09/02 - TraderMike: Greenspan Blues

Make sure you read tomorrow's newsletter.  I'll be making a very important announcement.  One of the most important messages I've written.

Ugly!

Today the DOW fell 172 points and the Nasdaq gave up 55, in an alarming sell off that took the Nasdaq right down to 1366 support and a close below its 150 day moving average.  The risk is now to the downside and I am going to spend the next few weeks looking for a short entry position.  I don't short when the market has fallen for 6 days in a row, so am now patiently waiting for a sizable rally or some sideways movement.  Eyes are still on gold.  I still believe that the market is going to try to hold up towards the end of the year, but will take some sort of short position on any sizable bounce in case it doesn't.  Will talk more about that when the time comes.

After some of my comments yesterday I got a lot of emails asking me about derivatives and the enormous short positions held by J.P. Morgan, Goldman Sachs, and other large Wall Street institutions.  For the skinny take a look at this:

ttp://www.goldensextant.com/commentary23.html

After you read this you'll see why the fundamentals for gold are pointing straight up.

Luckily for us gold pulled back down.  One more down day should make gold stocks attractive and if we get it I'll make a buy list of a few tomorrow night .

Today United Airlines filed for the biggest airline bankruptcy in history.  Why not.  We have already seen K-Mart and WorlCom filed for bankruptcy this year.  So we are getting more and more used to this type of news.

Bush's economic team has failed to inspire confidence.  Currency traders dumped the dollar after Bush announced that John Snow, the former chairman of railroad CSX, would become the new Secretary of the Treasury.

According to the Washington Post:

"Bush's decision to replace ousted Treasury Secretary Paul O'Neill with the head of the U.S.'s third-biggest rail system fueled speculation the administration may let the dollar's 6.5 percent decline against the yen and 14 percent drop against the euro this year continue to boost export growth."

"The dollar fell for a second day, to 122.84 yen at 3:10 p.m. in Tokyo, from 123.51 late Friday in New York. It was also at $1.0112 against the euro, from $1.0094."

``U.S. industry needs a weaker dollar and the appointment of Snow suggests the U.S. may let it continue to slide,'' said Masa Naito, senior vice president of international equity investment at Fuji Investment Management Co., which manages about 1 trillion yen"

Some of the word on the street today is that Bush fired O'Neill, because O'Neill didn't support his new deficit spending program to force the economy to grow.  It doesn't matter if that is true or not, nor is the changing of the guard going to make any real significant

The economy is going through a current account deficit correction and the stock market is in a bear market.  Both are trends that can't be stopped with an interest rate cut or a reduction in personal income taxes.  And they sure can't be stopped by positive talk. Time will fix things and there is still more to go. 

Tomorrow Alan Greenspan will make an interest rate announcement at 2:15 PM.  No one expects him to do anything.  Usually the market trades up into the announcement.  Obviously today that didn't happen, which underscores the dangerous state the market is in.   All people can hope for now is that it can just hold together for as long as possible.  The big rally is over and any long positions should be exited on any bounce.

Today Wal-Mart announced that last week's retail sales were at the very bottom end of expectations....the market drops in front of a Fed meeting.  Maybe Bush fired the wrong guys.