Bounce, Test, Bounce . . .

I laid out a probable course of events for the markets on May 18, and the markets appear (at least so far) to be cooperating with that thesis.

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Indice High Low Close Hi to Low Low to Close
           
Nasdaq  2378.32 2135.81 2219.41 10.20% 3.91%
           
Dow 11670.19 11030.47 11247.87 5.48% 1.97%
           
S&P500 1326.7 1245.34 1288.22 6.13% 3.44%
           
Russell 2000 784.62 696.06 737.45 11.29% 5.95%

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Here’s a look at a few indices to see how that is playing out:

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Nasdaq:  High of 2378.32 down to a Low of 2135.81, with Friday’s close at 2219.41.

Nazz_may_06

 

Dow: High of 11670.19 down to a Low of 11030.47, with Friday’s close at 11247.87.

Dow_may_06_1

SPX:  High of 1326.70 down to a Low of 1245.34, with Friday’s close at 1288.22.

Spx_may_06

Russell 2000: High of 784.62 down to a Low of 696.06, with Friday’s close at 737.45.

R2k_may_06

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Lets see how this all plays out next week . . 

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What's been said:

Discussions found on the web:
  1. C commented on Jun 3

    Shouldn’t the numbers in the “High to Low” column be negative?

    FWIW, the singular of indeces is index.

  2. chris commented on Jun 3

    good week to test lows…. and then some …

  3. Tim commented on Jun 3

    Barry
    At one point, and you may have cited Alan Farley, you opined that the indices would re-test their yearly highs. Do you still see the DOW making a run back towards 11,700? Maybe I missed it, what time-frame were you talking about – June, July, later this year?
    thx
    T

  4. donna commented on Jun 3

    bouncy bouncy foom!

  5. Barry Ritholtz commented on Jun 3

    We could make a run at the highs — or fail about halfway.

    That thought process is what motivated me to look at this actual data on a rainy Saturday, insteead of napping on the couch!

  6. Michael C. commented on Jun 3

    Barry, what indicators or factors (besides the indices themselves) are you keeping an eye on to determine if the market is likely to peter out or achieve new highs?

  7. B commented on Jun 3

    It seems the majority of people think we will sell off into October then restart a bull market. So did I before the extent of the ridiculousness unfolded. While this is obviously a distinct possibility, it isn’t a historically high probability. Given the extent of the imbalances and how this scenario has unfolded in 2006, I’d say anyone betting on that might belly up to the bar for a a big turd sandwich with a beer chaser.

    Money is sloshing through the system like never before. Some people would say that will prop up asset prices, be it stocks, bonds, commodities, real estate, etc. Yeah maybe. The fly in the ointment is Mister Market seldom does what everyone wants and I think he’s itching for a brawl. And he’s smarter than all of that liquidity. So, what’s he likely to do? Teach all of these greedy bastards a lesson. It’s called liquidity destruction, wealth destruction or whatever you want to call it. I call it a plain old fashioned ass whipping. If losing $13 trillion globally in 2000 wasn’t enough, he’ll likely lop off another similar haircut. And when’s a good time to do it? Right about the time every hedge fund, pension fund, Wall Street firm and retirement fund has loaded up on the bogus commodity bull and diworsified into the wild and wooly emerging markets. There was nothing quite like a good old fashioned enema to cure all ills. The kind Grandma used to give when you played outside too long and didn’t heed mother nature. Bend over Wall Street. It’s time to take your medicine. And bend over global economy because you’re going to get it courtesy of Wall Street’s fascination with commodities as an investment.

    For all of their foibles and short comings, economists do have some value in this world. Has anyone ever heard an economist say such a concept of twenty years of rising commodity or economic input prices is sustainable? Not hardly. And neither has history.

  8. GRL commented on Jun 3

    John Berry says recent data revisions leave the door open for a pause.

    http://tinyurl.com/p49x8

    How would a pause effect the unfolding of bounce-test-bounce-crash?

  9. todd commented on Jun 3

    Pull out a 3 year chart, and things look down-right bullish! I’m concerned about the slowing housing market… but I don’t think property values will tank until there is a recession, which will just exacerbate the situation.

    On the technical tip… after 2 years of consolidation it looks like the Dow is breaking out, and this might be the last great buying opportunity until some kind of dollar crisis, the conclusion of the Beijing 2008 olympics or the next big unknown.

    This sell-off wasn’t THAT bad and it wasn’t out of character. The timing was a little shitty as it wiped out the gains so far this year.

    A great way to lose money is to try to call a top… and the market has certainly not established any kind of downtrend yet.

  10. C commented on Jun 3

    Financial astrologer and market timer Arch Crawford has an interesting perspective on the timing of this year’s bounce/crash in a Forbes.com interview:

    http://tinyurl.com/fyl36

    At the bottom of the column is a link to a video where he talks about his predictions on stocks and commodities. He picks late July as the peak for equities and then a potential 1987-style crash condition kicking in during August/September.

  11. jcf commented on Jun 3

    Donna,
    You said it all, with marvelous succinctness. But, in this time of epidemic global irrationality, can we really expect, contra Keynes, for the market to suddenly begin to act rational and correct? Or is a point reached where pure physics takes over from rational decision making, which I think is what B is driving toward, scatology notwithstanding.

  12. Barry Ritholtz commented on Jun 4

    Todd

    Any longer term chart looks bullish — try to pick out 9/11 on a 10 year chart — or go back 35 years, and 1987 crash is all but invisible.

    What that reveals is the natural upward bias of the markets over time. Its the refuge of the Buy & Holders.

    By reality is far more complex. If you put money in the market in 1966 at Dow 1000, how long would you have kept it there? 16 years later, in 1982, the Dow was still at 1000 — and inflation was significant. Yet the markets are much higher today.

    Would you have stayed long for 40 years? Meanwhile, in the 1970s, you could have gotten risk free returns of 10% or better in treasuries. And if you thoiught that NYC would never go bankrupt, you could have gotten 16%.

    Buy and Hold worked from 1946-66, was a disaster from 1966-82, worked again from 1982-2000. Guess what’s probably next. . .

  13. toddZ commented on Jun 4

    I’m definitely not a buy and holder! I feel that everyone is way too negative right now (in the short term) and that this sell-off is a tradable buying opportunity!

    If the next rally fails to make new highs, then it will be time to take another look. It’s way to early to call the end in my opinion.

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