The disparity between chaotic world events and Wednesday's ultimately positive session for stocks brings about a perfect Buffalo Springfield moment: You know, "Stop, hey, what's that sound? Everyone look what's going down."
For what it's worth, what's going down are major global stock proxies (save the Nikkei 225, which enjoyed a technical bounce Wednesday). European bourses got rocked again, with London's FTSE 100 shedding 4.8%.
Great Britain, the U.S.' staunchest ally in the Iraq situation, offered some new proposals to resolve the diplomatic bottleneck in the United Nations, including a televised mea culpa by Saddam. Meanwhile, Serbia's prime minister was assassinated, there were protests against U.S. troops in Turkey, and little improvement of ongoing crises in Venezuela, the Korean peninsula and Israel. ("There's battle lines being drawn. Nobody's right if everybody's wrong.")
Despite all that, program-related buying, some shrewd technically driven short-covering and a touch of unjustified optimism sent major stock proxies modestly higher and well off their session lows Wednesday. The
Dow Jones Industrial Average
finished up 0.4% to 7552.07 after trading as low as 7416.64. The
gained 0.4% to 804.19 vs. its nadir of 788.90 and the
ended up 0.6% to 1279.24 after trading as low as 1253.22 and breaching its Feb. 13 intraday low of 1262.
was among the Dow's biggest restraint, falling 1.5% after J.P. Morgan downgraded several major oil producers.
fell 3.4% and the Amex Oil & Gas Index lost 2.2%.
Other individual movers included
, which tumbled 37% after warning its fiscal fourth-quarter results would not meet expectations.
Shares were bolstered early by false rumors of Osama bin Laden's capture and later by
report that the U.S. is only one Security Council vote away from the nine needed for passage of a second resolution. U.N. support for the use of force against Iraq is considered critical for British Prime Minister Tony Blair, who is facing stiff political opposition to the alternative. Either way, the U.S. wants a vote by week's end,
"I didn't see anything fundamental that occurred at 2 (p.m. EST) to cause this rally," said Tim Heekin, director of trading at Thomas Weisel Partners in San Francisco. "When I see a rally in the last hour
or so, it's often program-related."
Computer-driven buying by "passive indexers" could explain why many participants said Wednesday's session was quiet, although trading volume was up notably from recent levels. Over 1.5 billion shares traded on the
and 1.2 billion in over-the-counter activity.
In addition to program buying, Heekin attributed the advance to an abatement of previously "relentless" selling pressure and some covering of positions by "smart shorts watching technicals." These included the 785-787 level on the S&P futures, which the trader said marked a 75% Fibonacci retracement of the rally off the October lows. (Pit-traded S&P 500 futures traded as low as 788.50 before settling at 805.70.)
On a similarly technical note, some bears may have been cowed by a drop in bullish sentiment in Chartcraft's
survey to 39.8% from 41.6%. Although bearish sentiment also fell, to 37.5% from 38.2%, a drop below 40% bullishness has coincided with short-term reversals in the recent past, as Jim Cramer has repeatedly noted.
Also, the CBOE Market Volatility Index rose above 40 intraday -- trading as high as 41.16 before settling up 2.4% to 38.99. The VIX hit 40 before inflection points in July and October, although it ultimately moved much higher in both episodes, and the S&P 500 fell at least another 10% before reversing.
Finally, while European bourses remain mired at multiyear lows, U.S. averages remain stubbornly above their October lows, save the Dow Transports. To optimists, that's a bullish sign, or "positive divergence" in technical parlance.
Hard-core bears ("Paranoia strikes deep") say "poppycock" to all this, suggesting a retest, and breach, of the October lows is inevitable, noting market breadth favored decliners in both Big Board and over-the-counter trading. Skeptics also contend there are far too many folks trying to call a bottom for one to materialize, or for any rally to be sustained. Certainly, there's no shortage of bottom-pickers out there.
"If you can see some follow-through
to Wednesday's reversal, we can say for the very short-term a significant low was put in," Heekin said.
Finally, as alluded to here last night and later confirmed in
Columnist Conversation, Bob Brinker, of
, reported Tuesday his "long-term stock market timing model has returned to bullish territory for the first time since January 2000."
"Although additional minor stock market weakness is possible, we believe the market has reached the vicinity of a major cyclical bear market bottom," Brinker wrote in a bulletin to subscribers. He recommended a 100% fully invested position in equity portfolios, and predicted at least 25% gains for the S&P 500 and "significantly greater" gains for the Comp in the next one to three years.
Brinker is certainly a controversial figure. Having written about it
at the time, I certainly recall his short-term bullish call on the
Nasdaq 100 Unit Trust
in October 2000, which he reiterated in January 2001. Despite the QQQ's dismal performance, Brinker hasn't rescinded that call, to date, according to longtime Brinker watchers and subscribers. The market-timer and radio personality could not be reached for comment.
Clearly Brinker isn't infallible. Then again, who is?
Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
Aaron L. Task.