Top Line: Ouch...The stock market has decided to jump out of its down trend with a major push supposedly based on the "new" and improved bid from JP Morgan of Bear Stearns. For what it's worth, we think the trend has changed even though...The move may very well be "corrective" meaning it will be difficult to predict or trade.
The current move seems to have its beginnings in the financial events of the past ten days or so. Our thought is that the traders think Wall Street has been "healed" even though the news on Main Street remains, and will continue to be, poor. This will confuse the traders on Main Street due to how much bad news will come out over the next few weeks.
We should not disregard such a move even though we didn't get what we thought would be a final drop into a low that challenged the January lows. Too many negatives in this sentence for you??? Ok, the market showed us it has the power to go up. Our thought that the market would drop to a new low did get pushed to the side with this up move.
With this change in direction, we think the market is correcting the move that started at the October highs. From high to low, we saw about 2500 points in the Dow so we expect a 1250 point move, give or take, which would put us back up to around 13,000 which is very near by so we feel like we have missed most of the move. We will revise our targets as this move develops.
We do have a comment on the JPM move this morning. We saw BSC trade near 14 this morning maybe hoping that JPM would raise its offer to 20 or maybe higher. Now that the new bid has been revealed, we wonder if this eventuality was planned from the start, but it really doesn't matter...the cry babies win on Wall Street and it's a Crying Shame.
Ok, one more thing...The Fed will be able to take a bit of a break now that the stock market has moved up and the short term Treasury bills did get a yield over 1% by the end of the day from about 0.30% last week. The market is noticably breathing easier. Your thoughts (thanks Erick) are always appreciated.