'Rebound' Suffers Relapse; 'R' Word Is Uttered Anew
SAN FRANCISCO -- For one session, at least, the
Ending 3 1/2 days of upward momentum, the Dow Jones Industrial Average fell 1.6% today, while the S&P 500 lost 2.4% and the Nasdaq Composite shed 6%. Profit warnings and other bad news from -- most prominently -- Palm (PALM), Nortel Networks (NT) and Disney (DIS) served as harsh reminders of the still dicey fundamental outlook for much of corporate America.
Additionally, some market players were shaken (if not stirred) by a Reuters story late Tuesday in which Anirvan Banerji, director of research at the Economic Cycle Research Institute, said a recession is now unavoidable.
"We have passed a fork in the road and have switched to a recession track," Banerji was quoted as saying. He added that nearly all of ECRI's indicators are flashing recession warning signs and that "we don't make these calls lightly. It has been more than 11 years since we called the last recession."Meanwhile, a report showing higher-than-expected money supply growth in the eurozone raised concerns about whether the European Central Bank will ease tomorrow. The ECB appears determined to fight any signs of inflation's re-emergence, unlike our Federal Reserve (regardless of perceptions to the contrary). By almost every measure, money supply here is soaring, but the Fed appears willing to risk future inflation in its current effort to stem economic malaise. Past criticisms of Alan Greenspan and concerns about future inflation/stagflation notwithstanding, that's an appropriate approach, as I've said
Springtime for Wall Street?But we digress ( whadda you mean "we"?). In addition to most investors, today was no doubt particularly disappointing to those hoping yesterday had "confirmed" that Thursday's intraday reversal was for real. The "confirmation" or "expansion day" theory is a technical assessment that states, essentially, if you get a session of more than 1% gains on greater-than-average volume three or four sessions after a reversal day, it legitimizes the move. Given the Dow's 2.7% gain and New York Stock Exchange volume of 1.35 billion shares (vs. a daily average of 1.2 billion for December-February), yesterday's session appeared to at least contain the bare minimum necessary for a confirmation session. But even William O'Neil, who has popularized the "confirmation day" theory in his writings for Investors Business Daily, where he is chairman, expressed doubts in an interview late yesterday. There have been "positive, constructive signs," but "don't jump to conclusions everything is fine
P.S.These technical terms may seem arcane to some, but I point them out because certain segments on Wall Street are sharply focused on them. (Meanwhile, I'm curious to know what Gary B. Smith and/or Helene Meisler have to say on the subject.) Speaking of indicators, an Investors Intelligence survey showed bulls fell to 48.9% last week vs. 51.6% previously, while bears rose to 38% from 30.9%, the highest level since November 1999. A source at II noted that bullishness has been stubbornly high lately and just seven to eight weeks ago was above 60%, the highest since 1987. I took some heat in the RealMoney.com Columnist Conversation for suggesting the survey is a good contrary indicator. As with "confirmation days" and Wyckoff springs, you're (of course) free to either add the survey to the laundry list of indicators you consider relevant, or to dismiss it. Supporting the argument the survey has merit is this
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