Updated from 3:10 p.m. EDT
Tyson-Lewis analogy I used a few weeks ago is looking more and more accurate by the day. As with Tyson in the first seven rounds of that recent title fight, the market keeps on taking hits but stubbornly refuses to stay down.
To take that analogy further, today it was as if the VIX came into the ring and tied Lewis' jabbing hand behind his back.
Early on, stocks were rocked by revelations the
Securities and Exchange Commission
has launched a
investigation into revenue-recognition practices at
, which fell 4.5%. Additionally,
lowered its guidance, analysts' "suddenly" realized
is richly priced, a string of politicians waxed sternly about the "crisis of faith" issue, and both jobless claims and the producer price index were higher than expected.
But after having traded as low as 8605.34 early on, the
Dow Jones Industrial Average
recovered to trade as high as 8854.90 before closing down 0.1% to 8801.53. Broader averages fared even better, with the
ending up 0.8% to 927.37 after having traded as low as 900.94, while the
rallied 2.1% to 1374.43 vs. its intraday low of 1323.59.
Several factors were cited for the turnaround, including solid retail sales reports and raised guidance from
, as well as non-negative comments on
by Lehman Brothers' Dan Niles.
Niles expressed concerns about the chip giant's revenue and gross margin guidance but didn't lower his estimates or recommendation, as had been feared. Also, stocks reportedly were buoyed by the
latest round of optimistic performances from Wall Street strategists, today starring Lehman's Jeffrey Applegate and Morgan Stanley's Barton Biggs.
"As stock prices decline, I become more bullish," Biggs wrote, suggesting that "at today's prices, investors can make money in the short run, and that this is no time to be selling stocks." The veteran strategist also delves into a bit of patriotism and declares what a bad idea it is to bet against America.
But Biggs wasn't as wildly bullish as some suggested. He also wrote: "I don't believe we are on the verge of a new bull market or the immediate resurrection of" media and technology. Furthermore, he conceded "it's hard to argue with what has now become the conventional wisdom that were are in a decade of single-digit returns."
But what really turned the market, traders said, was the CBOE Market Volatility Index rising over 40 intraday. The VIX traded as high as 41.64 before closing down 0.1% to 38.64.
The 40 level on the VIX is closely watched by traders because it has coincided with significant market bottoms several times since 1986. However, what's interesting to note is that the VIX was above 40 for
in each of those past episodes, according to a report today by Arnhold & S. Bleichroeder:
In 1987, from Oct. 19 through Dec. 17;
In 1988, from Jan. 8 through Jan. 14, and again on Jan. 21;
In 1998, on 21 of 34 days between Aug. 28 and Oct. 14, and;
In September 2001, from Sept. 17 through Sept. 24.
That track record should give those excited about today's rally pause, given the VIX was above 40 for all of a few
. Then again, it does (still) seem like a lot of participants are more fearful of missing out on the next rally than of further losses, so we shouldn't underestimate how long the "VIX over 40" momentum will last.
Tune In The Taskmaster
If you want to put a voice behind the words, tune in to to WABC radio's "Batchelor & Alexander" show tonight around 9:05 p.m. PDT/12:05 a.m. EDT. I've been a semiregular guest of the show for some time and will be interviewed tonight as part of their three-hour special on "Wall Street of Shame." The special will air live tonight in New York and will be rebroadcast on Saturday on WABC in New York, WMAL in Washington, WRKO in Boston, and WBT in Charlotte, N.C.
Check local listings or the
WABC Web site for more details and webcasting options.
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.