Index Close Change
Dow 8516.43 +25.07
S&P 500 923.42 +3.69
Nasdaq Composite 1489.87 -1.22
Nasdaq 100 1113.68 +0.83
Russell 2000 410.73 +1.70
Semiconductor Index (SOX) 337.57 -0.06
Bank Index 798.87 +4.72
Amex Gold Bugs Index 143.37 +2.58
Dow Transports 2356.39 -8.89
Dow Utilities 232.59 -0.50
NYSE advance-decline +660 +242
Nikkei 225 8018.51 -40.97
10-year Treasury Bond 3.39% +0.016

Editor's note: This column, which reflects market activity from the day before, originally appeared May 21 on RealMoney.com. To sign up for RealMoney, where you can read Bill Fleckenstein's commentary every day, please click here for a free trial.

The equity markets were soggy last night, and our stock-index futures were back and forth over unchanged, before turning red by the time the casino opened for business this morning. However, the futures bolted higher shortly after the opening when our incompetent Fed chairman commenced another round of jawboning on Capitol Hill. I parsed the speech and found nothing but cluelessness as usual. He opined that productivity was responsible for things not having been worse, and also chirped about oil prices.

Center-Hall Siphon King: Of course, he made sure to let everyone in on the big secret that the economy was doing better because folks were levering up and taking money out of their homes (though he acknowledged that so far, the economy has been sort of hesitant to respond to all the stimulus). He said, "These factors Fed easing measures, along with the ability of households to tap equity accrued in residential property, should continue to bolster consumer spending and the purchase of new homes." What I find rather ironic is that here he is, counseling people to pile on debt and go crazy in the housing market at the same time the Fed is talking about how scared it is of deflation. Somehow, those two things don't quite seem to jibe.

But what got the markets all jazzed were Greenspan's comments that the Fed could move out the curve in terms of monetization. That set off an explosion in the bond market, with the yield on the long bond touching 4.29%. Basically the Fed is saying, we'll just monetize every stinking dollar of debt the government has if we have to. Amazingly, fixed-income participants think that's a good thing. So, the incredible feeding frenzy to lock in lower yields continues unabated in this market. To the many readers I've heard from who are considering shorting fixed income, I would respond, be darned careful. When things get so wild, and financial assets trade this crazily, the risk/reward equation is stacked against you. I wouldn't want to own bonds, but I wouldn't advocate shorting them either, at least not unless you really, really know what you're doing.

Crying a River of Contingency Fees: In any case, after the initial flurry to the upside, the entire day was basically composed of a series of selloffs and declines, all within a fairly small range. As the box scores show, not too much happened to the various equity indices. There was something of a stir in tobacco land, however, as a Florida appeals court threw out the $145 billion punitive damage verdict against Altria ( MO) and other tobacco companies. That stock was up nearly 10% on the day. So, a sign of sanity in the tort arena, which I think is always good news for everyone.

Away from stocks, fixed income (aka the "return-free risk market") closed slightly lower, after having been all over the place. The dollar was a bit firmer today, slightly stronger against the euro and up 0.5% against the yen. The metals were mixed, with gold higher by 1.5% and silver lower by 1%.

Turning to other news, the latest survey from Investors Intelligence shows that bulls are up to 56% and bears are down to 20.9%. A reader who's been keeping track emailed me that bears are now at the lowest level since a reading of around 19% in 1987. So, sentiment has gotten very, very lopsided. I think that is a red flag for the bulls, if not a sell signal for the bears.

Another warning sign, this one for tech bulls in particular, comes via comments on Digitimes.com: "The Market Intelligence Center slashed its forecast for second-quarter mobile phone shipments from Taiwanese companies by 28.3% to 6.27 million units, from an earlier forecast of 9.34 million units." Why? For the same reason that Motorola ( MOT) just said its sales may be affected: SARS.

Diagnosis: Clinically Depressed Awareness: A couple of weeks ago, I suggested that folks keep SARS on their radar screens, especially as it pertains to technology. A few people actually chided me for talking about SARS because I'm not a doctor. Well, the point is, as I was saying at the time, when a potential problem is ignored, it's wise to pay attention, because it hasn't been factored into stock prices. I continue to think SARS is going to cause problems for many tech companies.

Turning to today's New York Times, there is a story titled "Banker-Analyst Firewall Plan to Be Revisited," which should be filed in the what-part-of-no-don't-they-understand department. You will recall that the ink was barely dry on the regulatory agreement when a Bear Stearns ( BSC) analyst made positive comments on iPayment ( IPMT). So, in view of Wall Street's continued reluctance to do the right thing, or even do what it agreed to, the SEC is going to meet with bankers tomorrow, to keep everybody on the same page.

Wheedle Dumb and Wheedle Defense: As the story notes, the policy of barring analysts from participating in any way on IPO road shows was "underlined in the regulatory agreement." However, the story continues: "Some bank executives have asked whether it would be acceptable if an investment banker represented the views of his analyst to potential investors on road shows. Such splitting of hairs has angered regulators, whose doubts have increased in the weeks after the settlement over Wall Street's agreement with the spirit of the settlement the emphasis is mine. In the eyes of regulators, there is no material difference between a research analyst recommending a company during a road show and a banker repeating his analyst's views. . . . " I would think that should all be pretty obvious, but the fact that Wall Street is trying to fabricate a material difference just goes to show, the more things change, the more they stay the same.

Finally, in the good-news-bad-news department, my email box has been absolutely flooded. (For those of you who may have missed my announcement, I have set up a Web site to handle email: www.fleckensteincapital.com) While I am trying my best to answer all the questions, there are only so many hours in the day, so please be patient as I try to work my way through all your questions.

William Fleckenstein is the president of Fleckenstein Capital, which manages a hedge fund based in Seattle. Outside contributing columnists for TheStreet.com and RealMoney, including Mr. Fleckenstein, may, from time to time, write about securities in which they have a position. In such cases, appropriate disclosure is made. At time of publication, Fleckenstein Capital had no position in stocks mentioned, although positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy, sell or hold any security. The views and opinions expressed in Mr. Fleckenstein's columns are his own and not necessarily those of TheStreet.com. While Mr. Fleckenstein cannot provide personalized investment advice or recommendations, he invites you to send comments on his column to bfleckenstein@thestreet.com.

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