Media Appearance: Kudlow & Company (5/22/06)

what did you think of today’s failed 3:00pm rally? i guess it lifted us off the lows but really looks like ‘buy the dips’ is now ‘sell the rallies’…..

This program should be good- Jack Bouroudjian a real trader (lots of floor time) (the real deal)!!!

In accord with emd, I got the distinct impression that today’s market performance was “the rally attempt that failed,” the latest of many such attempts.

However, CNBC kept trumpeting the fact that the S&P bounced off of resistance at the 200 day M/A.

Any anyone enlighten me?

Looks like one of Cramer’s chimps got out of his cage.

I wouldn’t call today’s 2pm rally off of the bottom as a failure….yet. Mr. Market is very crafty. There is a formation on the 30 minute chart that has developed over the last three days that is a classic bottom if it holds. It has not come close to breaking. The only question is will it hold. From where we sit today, there are literally less than a dozen times in over thirty years that this scenario has played out to the downside without some abatement.

The problem with this correction is everyone is staring at commodities. Yes, the leaders are correcting. But, technology is also getting murdered. And so is everything surrounding Asia. Europe and the US are actually holding up quite well sans Russia which is really an Asia play as well. And it is not just commodities that are being crucified as an Asia play. Emerging market debt is blowing up. The technology laden Taiwan exchange is getting hammered. Ditto with Korea and Japan. Some Asian financials taking it on the chin as well while the US banks are holding up extremely well.

One could surmise it’s simply a correction in blow off commodities but that would be incomplete. Is Asia overheating? Is there a threat of hyperinflation in very basic material oriented Asian economies? Is Asia in jeopardy of deflating? Is the commodity boom killing a basic material sensitive Asia? Is the dollar going to drop further and crater Asian economies? Is the American consumer shutting down? Are central banks simply shutting off liquidity? It appears something more is going on rather than a “correction” to an overheated basic materials sector. Time will tell if this is all alot to do about nothing.

And to all of the bears who love to hate America, and to those who say Asia will prosper when we collapse, you might notice that while Brazil, Taiwan, Malaysia, Korea, Japan, Russia and others are collapsing the S&P 500 has significantly outperformed all of them in this sell off. If that continues, it will likely portend a great bull in US equities the next cycle. That means if we take a big hit, Asia and emerging markets will likely be devastated. Oh, and while the Shanghai Index is holding up, the ADRs are not. And, the Shanghai Index has been a counter trade to economic growth in China so its action is irrelevant. ie, It has been inversely correlated to Chinese growth so it tells us nothing.

I think this correction is liquidity related. That is why the weaker, more speculative plays and exchanges are being hit harder than the safe haven ones. When liquidity dries up the hot money disappears and that money looks like it was playing mainly in emerging market exchanges.

This is similar to what happened in the late ’90’s when the bubble started to top and Greenspan had to kick the printing press into overdrive. Mr. Market is issuing his challenge to Bernanke. He has hostages and he want’s to see if Bernanke will ride out with his printing posse to save the day and meet the challenge. If not Mr. Market will soon regain control of the market and this could finally signal the end of the ‘greenspan put’ era.

I am hoping Bernanke doesn’t ride out. It’s about time free market forces once again gained control of the markets without having to worry about the fed bailing out the bulls every time they get a little uncomfortable

per B:

“And to all of the bears who love to hate America, and to those who say Asia will prosper when we collapse, you might notice that while Brazil, Taiwan, Malaysia, Korea, Japan, Russia and others are collapsing the S&P 500 has significantly outperformed all of them in this sell off. That means if we take a big hit, Asia and emerging markets will likely be devastated.”

I trust that your statement about “bears who love to hate America” was just careless hyperbole. But I don’t understand your apparent belief that we are okay as long as everybody else is worse- Last Man Standing is a good outcome?

We depend on many of the companies listed on the Asian exchanges for an endless supply of cheap baubles along with coolie labor in call centers, etc. It also strikes me as highly likely that some US-based hedge funds were wiped out in India yesterday/today and perhaps elsewhere, yet the US financial media doesn’t seem especially interested despite its enthusiasm for “globalization” (mercantilism/neo-colonialism) and the obvious impact.

So is there an Asian tsunami already heading our way in a few days or weeks? Could be, but the first tell will be in the forex markets which is fine if you happen to be up in the middle of the night watching the JPY charts. But even then you will only get a few hours notice.

Re K&C: All I know is that 100 million immigrants would be great for the country — they would solve a LOT of problems.

It was nice hearing Barry speak without having Cody Willard interrupt him.

Barry I seriously don’t even know how you put up with Kudlow at sometimes, and you do it with so much class. I don’t remember exactly what he said, but atop the program when he introduced you, he simply had to mix in a smart remark.

I for one am still not convinced we have a nearterm bottom. I think we could possibly go lower tomorrow before we rebound, or even the next day.

The NYSE and Nasdaq still finished down 1%, and the S&P was still down half a % point despite all the indices trying to rally into the close.

Sure you could argue that the S&P bounced off its 200 day MA, but it also did that on friday, and we still saw a lower low and a lower high today. The NYSE could still fall another 250 points or so before it even tests the 200 day MA.

There’s no real economic data coming out until atleast Wednesday, and all the significant earnings reports have come and gone. Even the companies that meet or beat expectations all continue to factor in rising inflationary costs &/or increasing energy costs into future estimate guidances.

This market can only dust off so much bad news. It just seems like its finally factoring all this in now and its looking like a snowball effect.

Human behavior is mighty predictable. We all fall into well defined buckets. I don’t recall stating anything I was accused of stating in this thread.

Bullish? We’ll be ok? Careless hyperbole? Patroitism? Oh yea baby. Those are your words not mine. lol