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Oh...so now there are subprime problems...so now there are housing problems. As I have said, there are no problems until the market starts heading down.
The amazing thing about Thursday's action was the reaction. Most thought the poor action just started. The poor action has been going on for weeks despite the DOW hitting 14,000. As I told you, the market was getting thinner and thinner...new lows were expanding markedly while new highs were contracting...small caps and mid caps were breaking down...and the average stock was getting klonked. This week, it was time for big caps to play catch-up.
Now what? Not sure. Markets are short term oversold and extended to the downside but if we are indeed in some trouble here, oversold can get more oversold. All I know is that too many stocks and sectors have topped...and I don't think they have a chance to just turn around.
I do have a couple of predictions. First, I think you are going to see all the minions out in force...telling you everything is ok. Paulson was out again Thursday saying subprime is not a problem. This man is turning into a classic case of the "boy who cried wolf." If he keeps this up, there will come a point where the market turns a deaf ear. The market actually turned a bit after he yapped. Secondly, with any more ugly, I expect Gentle Ben to throw in a rate cut as Gentle Ben does not want the market to go down.
I will have a much bigger report on Monday. I just wanted to make note that
the confirmed rally has ended. Investors Business Daily as well as myself
believe the market is now in corrective mode and until the market experiences
another follow through day like March 21, it is time to be defensive.
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