Monday and the start of October as well as a new quarter brought out the buyers. So, let’s see before the market opened, we heard several interesting news items. We brought you the news last night about UBS writing down $3.5 billion in assets. Then Monday morning C (Citigroup) warned on third quarter saying that their net would fall 60% due to credit market problems, yes, subprime is in there.
After the market opened, the ISM manufacturing report came out showing that number stayed above the 50 line but declining from last month. Now, of course, the “bad” news brings out the Fed talk and how the Fed can now lower rates. Yes, that thinking should not be reasonable as the Dow makes a new high but the Fed did lower rates last month even as the market was within a few percent of the top.
As the market moves higher, the bears have vanished except for a few of them. The ones remaining tell us that the market is overbought and that the blue chips are moving up without a lot of participation. Yes, the home builders are being touted as good buys right now and have moved up a little. And, the banks listed above give out bad news and rally on the day making the world think that the worst is over for the subprime problems except that the Fed still needs to come in a lower some more just to make sure. At the very least, the market does not have a lot of leaders that are making new highs along with the Dow.
As we continue to watch this market, this is the first day that the Dow has been able to get much above the highs set the day after the Fed lowered rates. The market has been overbought and Monday’s headline says that the “Dow hits record on Fed cut dreams”. We would emphasize the word Dreams.