Major Reversal Day, Again

We’re not sure where to start this evening as we catch our breath after this wild day in the stock market.  John Chambers, the CSCO kid, announced on Tuesday evening that CSCO would be doing well over the next year, projecting higher revenues.  We noticed that the revenue numbers were somewhat tainted by the fact that Receivables were up nearly the same amount as revenues, meaning that there are still some outstanding bills that need to be paid on the sales.  But, the CSCO kid did manage to spin a good story for the market, at least in the early going.  

As the market was opening, there was a head of steam based on the CSCO news and the futures had lit up the pre-opening prices.  We start with the NASDAQ 100, NDX, which was the index most heavily affected by CSCO.  At the opening, the NDX jumped 1.3% and by around noon CDT it had moved up over 2.2% to 1517.90.  

In the past few weeks we had been watching for jobs’ report Friday, August 4th, because we thought that could be the high in the market.  If you go back to that day and see where the NDX traded, the high was just over 1530.  We had said that it had the potential to go to 1550 so we were a bit high there but we did call the time frame.  Anyway, Wednesday’s 1517 was well short of last Friday’s 1530 and it was on much more hype than the jobs’ report generated.

Looking at the trading day for the Dow, we see that it jumped at the opening bell as well, about 75 points within a few minutes.  From there it started its sojourn down and down all day long with only a minor bump up right around noon CDT, closing pretty much on the low of the day, down nearly 100 points.  The high for the day at right around 11,250 was again lower than the jobs’ report Friday, August 4th, high of around 11,340.  

If you look at the pattern of trading last Friday and then on Wednesday, you can see the similar up big mornings with a drop off the rest of the day.  These are bearish patterns especially combined with the lower highs on the Wednesday spurt relative to the Friday spurt.  This trading represents a very Weak market and one we are happy to be short in.  We truly hope you have exited your longs because the next move will not be pleasant if you haven’t.  With the Dow up above 11,000 even now, there is so little fear in the market generally.  We don’t see that number holding much longer especially given the bullish undertone that brought us Wednesday morning’s trading.  

People are bullish without Any real price moves to the upside.  Looking back to the May highs and comparing the bullishness then to now is a little difficult but we are much lower in price now than we were back then, especially in the NASDAQ indexes.  The Dow high in May was right around 11,700 and now it’s just under 11,100 for about 600 points or about 6%.  The NASDAQ 100, NDX, the May high was (actually the NDX high was in April) at 1750 and today’s close around 1485 is 265 points lower or 15%.   Even CSCO is 10% lower at tonight’s close of 19.78 compared to its April/May highs at 22.  

We are confidently bearish this evening which is probably a bad thing but we still think the market is heading down into early fall.  The market action Friday and Wednesday have given us good reason to be bearish.  The market’s message is very clear—it wants to go down.

We’ll be back tomorrow.  These next few weeks should be very profitable for our short positions.

Dow Industrials:  11,076.18  -97.41
QQQQ:  36.53
RYVNX:   24.27  (own)
RYAIX:  25.47
RYCWX:  43.66  (own)
TLT:  85.90   (own)
BEGBX:  13.68