Market Summary October 12, 2000 Posted Daily Between 5 and 6PM EST

by Lance Lewis

Pandoras Box Pops Open

Asia went through a lot of motion last night, but when all was said and done, Hong Kong and Japan went out unchanged. South Korea and Taiwan were not so lucky as both received a 4 percent spanking. Europe was up around a percent as we approached the open in the US (but turned sharply lower as things began to unravel in the US market-- more on that later.) The futures were a bit strongerin the US surprisingly enough. We had a little pop at the open that was immediately sold, from there the market turned into a submarine and we quickly drove down 2 percent in the spoos. The remainder of the day saw us drift sideways with a downward bias as selling pressure was relentless but not panicky. Stocks closed right about on the lows with the Dow closing just shy of piercing Dow 10,000. Volume was big once again (1.4 bil on the NYSE and 2.1 bil on the Naz.) Breadth was smelly with decliners beating advancers by just shy of 3 to 1 on both casinos. Big gainers on the day were in the golds (no, this is not a practical joke) as the XAU rose 5 percent. Big losers were everywhere else, but the retail stocks were hit the hardest as the RLX fell 7 percent.

First off, we had news of violence in Israel as well as a terrorist attack on a US destroyer in Yemen about an hour before the open. Recall that the futures were strongly positive and Europe was higher on the back of this news. Nobody seemed to care at the time. HD warned and was indicated down 25 percent before the open. Even then, the bulls were still yawning as the futures barely even blipped. Then, when GLWs preannouncement of good news failed to rally stocks on the open, suddenly pandemonium in the Middle East mattered. This is just another classic example of the bubbles ability (or was the ability) to completely disregard reality. Lets clear away all the guys that had news last night, first. AMD reported a pretty good quarter, but as we have seen with many other semiconductors, investors arent selling these shares based on yesterdays news. They are selling based on tomorrows news. AMD gapped up $2 (which was the high of the day), but finished up only fractionally to close on the low of the day. AMCC, another semi, also reported last night and blew away estimates. Similarly, it gapped up about $15 bucks and managed to close down $3. GLW preannounced a great quarter (keep in mind that greatness and much more are already priced into GLW shares as it trades at almost 100x earnings) and gapped up about $8. From there it was all downhill as the stock proceeded to sell off and close near the low of the day, up only about a buck. Big cap tech was lower across the board with a few exceptions like DELL, ORCL, and INTC that rose slightly. The SOX was hit for 2 percent as selling pressure resumed in the chippies. Over in handsets, NOK fell another 12 percent, ERICY a couple percent, and MOT 6 percent. Once again, many of the trashier tech stocks managed to stay in the green as people are still chasing whatever goes up regardless of valuation. Just another sign that this decline has much further to go, in my opinion. Bottoms are made by panics. SEBL trading up a half on the day at 400x earnings is not in the same galaxy as a panic. Moving on Over in the financials, banks were taking a pounding as the BKX fell 5 percent. The derivative king (CMB/JPM) fell 7 percent. The brokers were clubbed as the XBD fell 5 percent and closed right on yesterdays low. Credit card garbage was beat on to the tune of a 6 percent loss in both PVN and KRB. Over in retail stocks, we got a warning from HD this morning. The stock proceeded to fall off a cliff by 30 percent. This hit other retail stocks as well, as the RLX finally made the Nestea plunge and collapsed 8 percent through its lows that have held up so well for the last 2 years. Id say this break in the retail index (RLX) confirms a recession is on the way if there were any doubts still out there. Lastly, I think it is important to remember that while what is going over in the Middle East is certainly not bullish and only exacerbates the oil dislocation. Those unfortunate events in no way caused the break today even though they certainly may have contributed to the emotional fear factor. The news is merely incidental. The deteriorating fundamentals building up towards this break have been with us for some time and are finally coming home to roost.

Oil rose 3 bucks on the news of the events in the Middle East and closed over $36, hitting a new high. The XOI and OSX both rose around 2 percent in response. Gold shocked the planet and did the unthinkable it rose. With gold closing up about $5, the XAU rose 5 percent, and the HUI rose 7 percent. The dollar was strongly higher against most currencies in a flight to "quality" on the news of violence in the Middle East. The euro broke last weeks lows against the dollar as it resumed its trip towards its lows and the ultimate target of zero. Treasuries were higher in a flight to "quality" as the yield on the 10yr fell to 5.71%.

Tonight we get earnings from GTW, among others. I think those that are looking for these earnings announcements to turn the market higher will be sorely disappointed. Today was another violent break in the market as we approach what I think will be an all-out panic decline over the next several days. We have yet to feel the full force of mutual fund redemptions and margin calls, which I expect will hit the market like a giant club over the next several days. All the leverage that has been used for the last several years to propel this ponzi scheme of a stock market higher is finally beginning to unwind, and it will not be pretty. It is truly unfortunate that things were allowed to get so out of hand, but now that Pandoras box has been opened, I dont think theres any stopping it. Were going MUCH lower

Finally, be sure and check out the Mid-Week Analysis that is posted every Wed as well as our International Perspective.

http://216.46.231.211/bearthoughts.htm

-- Carl Jenkins (Somewherepress@aol.com), October 12, 2000

Answers

I have to agree with this guy, Lance Lewis. Bubble.com, I think, is about to burst. When the money center banks come in with their 3Q's, duck, or run for cover.

-- Billiver (billliver@aol.com), October 12, 2000.

Even though I must admit I do not understand market techniques and market dynamics perhaps as well as I should, I must also admit that I find these stock market articles you are posting fascinating, Carl.

-- LillyLP (lillyLP@aol.com), October 12, 2000.

I think the thing that strikes me sullen about this current market, more than anything else, is the revelation that Big Tech companies like Lucent are carrying so much bad paper, financing their customers. This is analogous to all the junk bonds floating around out there, with their ever-widening spreads with U.S. treasuries.

You call the Middle East a powder keg? This is a financial powder keg.

-- Wellesley (wellesley@freport.net), October 12, 2000.

An all-out panic decllne sounds very serious to me, and, over the next several days, seriouser yet.

My question is, will this all-out panic result in a market bottom, from which we will re-launch a new bubble.com, or will we linger? How long? Months? Years?

-- Loner (loner@bigfoot.com), October 12, 2000.

What gets to me is something like Home Depot only missing its earnings target by a lousy little 3 cents a share, and its stock drops 30%.

This indicates investor nervousness to the extreme. So, what does that, alone, portend for the market as a whole?

-- Wayward (wayward@webtv.net), October 12, 2000.

All the other market sell offs bring out the so-called bottom fishers, looking for bargains. My queston is where are they this time? I see hide nor hair of them.

-- QMan (qman@c-zone.net), October 12, 2000.