Why Your Friends Started Quoting Scrap-Metal Prices

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It gets funky when the market ponders shifting its view of the world.

Take the current environment. In what should be the dog days of summer, all kinds of strange things are happening as the stock market trades on heavy volume and averages gyrate madly throughout the day. And, with unease mounting, investors find themselves grasping for explanations. There's more talk about 200-day moving averages and advance-decline lines than one can recall. It's a technician's dream come true!

But that's not all. If the war is between the bulls and bears, the long-battered bears find themselves driving ahead on several fronts. While television pundits yack on, let's take a look at some of the struggles:

New York vs. Chicago

Usually the futures markets in Chicago and the stock (cash) markets in New York dance intimately with one another. But after a sharp drop, the futures markets find themselves the home of bears, seeking to yank the market lower still. The chance to grab a few more points on the downside is contributing to some very active action in the Chicago futures pits. In New York, the bulls have tried to put fresh cash to work, hoping to drag the market higher despite the action in the futures pit.

Rumors Galore

This becomes the most insidious aspect of any real bull/bear battle. Today, one fund manager insisted that

President Clinton

was going to resign immediately after his testimony. In days past a Russian leader would die a thousand deaths as the bulls and bears tangled. Another favorite is the failing Japanese bank, beset by something like "bad derivatives" trades. This one surfaced on Thursday once again, though one money manager quipped that it would take more than some rumor to make things "worse than they already are" for the ailing Japanese banks.

But this rumor has some legs. No fewer than four phone calls from separate quarters identified

Bank of Tokyo-Mitsubishi

as the problem bank. That's a shift from the standard Japan bank rumor, which invariably revolves around

Fuji Bank

.

Strategists Make Amazing Pronouncements

This is a time when reputations are forged and memories made. Recall

Elaine Garzarelli's

1987 call? She still lives off that remark 11 years later, though she's faded. In the past few days

Ralph Acampora

of

Prudential

has made an acrobatic move to the bearish side.

Abby J. Cohen

of

Goldman Sachs

, while not exactly making herself available, has quietly maintained a bullish stance -- not a big surprise.

But other big names have made bold pronouncements.

Morgan Stanley's

Steve Roach, always anxious to make a mark with his economic analysis, titles his latest research report The Great American Bubble and claims that a refiguring of certain census data shows that the current consumer-driven expansion is being driven inordinately by a stock-market wealth effect.

In this vein, Thomas Galvin of

DLJ

and Jeffrey Applegate of

Lehman Brothers

turned

more

bullish as Acampora danced in his bear suit.

As an aside, Acampora went negative in mid-July 1996, perfectly timing that summer's bottom. He was equally skittish in the fall of 1997. Yet, somehow, the market has decided the man's a sage. Go figure.

Fixation on the Surreal

Traders, like

James J. Cramer

, a writer for

TheStreet.com

, finds himself

obsessing on the guest list at

CNBC

. Others have become fanatical about the number of new lows or new highs. One fellow is quoting scrap metal prices, or the cost of soy meal. Some count ships in Long Beach. All believe these tidbits will provide the answer. This kind of small-item fixation is common in the dog days of August, but when the market goes nasty, these kinds of thoughts amplify accordingly, creating a very strange mixture of indicators.

So who's winning? Hard to say, since the battle remains fully pitched. The strength of technology stocks on Thursday, especially among big names like

Intel

(INTC) - Get Report

, would hint that the bulls seem to be gathering strength on the bears' flank. Friday, jobs report and all, will prove a crucial test.

Media Notes:

The Wall Street Journal

has a story today that says, "It's not just about Asia." And then proceeds not to offer a non-Asian explanation for what's happening in the market. At least none that I could find. Help me out with that one...

Have you ever seen so much techno mumbo-jumbo in the coverage of the stock market's drop this week? It was like the first week of the Lewinsky mess, with every newspaper trying to fill several pages of copy with something, despite the paucity of information. No news? Get me the 100-day moving average!...

The New York Times

, writing on its front page, says investors' attitudes have "changed" in this week's selloff. Hmm. Does that mean people no longer want to make money in the stock market? No explanation came before the "jump" off the front page, and since the story seemed bizarre, I never got to page D6 or whatever it was...

Predicted headline in

The Economist

this week: Resign, Dammit!

Fear factor from mother in Minnesota yesterday morning: "Hope everyone is buying those bargains today."