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Stocks Slide Continues Despite Late Day Drama - Money Matters for 10/06/05 Don Bravo | 10/06/05
Yesterday, I tempered my remarks in an effort to curb my enthusiasm for an all-out market crash. Not that I am rooting for stocks to fall through the floor, but a massive one-day event does have a way of clearing the decks and supplying a clear frame of reference. To me, a massive one or two day sell-off is far preferable to a slow grind downward, complete with agonizing speculation.
Anybody who tells you now is a good time to buy stocks should be fired before being blindfolded and shot. All one needs do is take a look at the charts of any of the major indices for the past three days. We are well into the throes of a major market reversal. Stocks are heading lower, and despite what words of hope I offered yesterday, they are more than likely to head much lower over the coming 30 to 90 days.
I've been among the many voices saying that stocks have been overvalued for the past 18 months. After calling the mini-bear in March, it's seems to be prediction time again.
Well, here it is.
Over the course of the 4th quarter, stocks will hit the skids in a relatively big way. The carnage should begin with the onset of earnings reports, about the middle of next week. As a matter of course, the carnage has already begun and if tomorrow's labor report is a stinker - and it very well may be - the markets will be down for the count.
The Dow ended today down 30 points, just below the 10,300 mark, though if it wasn't for a herculean effort in the final 20 minutes, the industrials would have suffered their third consecutive large point decline. As it is, the Dow is down close to 300 points since the close last Friday, and it could easily be closer to 400. The late day rally (on no news whatsoever) saved the Dow some 70 points in losses. The Nasdaq and NYSE likewise have been burned all week.
What lies ahead is a slippery slope. US equities are in a down cycle and the prospects of good news are few and far between.
Despite the uninspired headline number ("oh, it was only down 30 points"), the advance-decline and new highs - new lows tell the real story of a market searching for a bottom with a long, long way to go.
Regardless of what happens tomorrow, when the bear is done ravaging Wall Street, expect the Dow to be left standing (or slouching, as the case may be) at around 9,200 and the Nasdaq hovering in the 1750-1800 area. That could take us through Christmas, but more likely is that it will wash out sooner rather than later.
Beyond that, I have no crystal ball, but we could be in a recession as early as next quarter. At the best, the US economy will limp along at about a 2-3% growth rate.
Keep an eye on the charts and stop losses tight.
BY THE NUMBERS
Dow Jones: -30.26; 10,287.10 close
NYSE Advancers: 1081
Nasdaq Advancers: 1044
NYSE New Highs: 34
Nasdaq New Highs: 61
Gold: +5.70; 475.00 close
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