MARKET COMMENT
March 5, 2007
“And, I’m pleased
that we have a strong team.
And the
president’s working group, Ben Bernanke, Chris Cox, Reuben Jeffrey and I have
spent a lot of time just thinking through [potential financial crisis’]…
We spend a lot of time getting prepared.
…what we try to do is just make sure we’re
ready if one [financial crisis] does happen to come.”
Henry Paulson
Treasury Secretary
March 4, 2007
“ABC This Week”
I would interpret the above comments as perhaps a sign that there’s
a willingness to be more aggressive with markets.
So without going into any conspiracy
theories, let’s just leave it at that.
A gap open lower in US equity markets followed another rout in
overseas markets.
A rally quickly followed
since markets were at least short-term oversold.
Even at its height however, the
advance/decline relationship was still decidedly bearish--700 up and 2000
down.
By the end of trading mid-day
gains couldn’t hold.
In the last few
minutes of trading markets were hit hard by heavy selling.
The 5 minute chart of SPY tells the tale.
And what of breadth by the close?
Safe havens have included bonds and cash--nothing else
really.
Gold is now perceived as just another risky asset versus
assuming the opposite historical role.
Overseas is where all the problems began but the contagion
is profound.
There are many ugly charts to post.
Any positive looking charts are few and far
between and mostly confined to bonds.
All
anyone can conclude now “technically” is that markets are correcting [“and
how!!!”].
Some may just repeat 30%
corrections like last summer.
For some
Emerging Markets, that kind of action goes with the territory.
You either accept that going in or trade it
as best you can.
The primary fundamental concern is for American
consumers.
If credit standards tighten
dramatically, Chucky will stop spending.
China
and their suppliers will feel the pinch.
Combined that could lead to a global economic contraction of some
degree.
We won’t engage in conspiracy theories.
We’re aware of several things however.
Paulson’s a Goldman Sachs guy--maybe I could
stop there.
He’s reenergized the
president’s Working Group on Financial Markets [aka,
the PPT].
Bernanke has often stated his
willingness to print money to stem any severe financial market declines [“helicopter
Ben”].
There’s a powerful array of fee-dependent
financial institutions counting on bullish versus bearish conditions.
You see, hear and read their bullish bias in
the financial media everyday [after all we know who pays the bills, right?].
Taken together this makes any shorting attempts difficult to
sustain as you’re betting against the house.
Have a pleasant evening.
Disclaimer:
Among
other issues, the ETF Digest maintains positions in: SHY, IEF, TLT, GLD, DBP,
FXY, EEM, EWJ and EWA.