If you want sanity don't look in the market today.
The market defied gravity and reason today. On the day before the Greenspan testimony before the Senate and the House the market soared +213 on a broad based multi-sector rally. Normally the market would be very cautious about a possible market bombing by Mr. Greenspan. Traders were left scratching their heads over the sudden rise.
One rumor making the rounds was that a large hedge fund was short stocks, and became worried after the recent bounces off 9200, decided to cover all their open shorts. Just a rumor but it was the only straw available to grasp.
While the advances beat decliners 6 to 4 the volume was still not exciting. There was an anemic 720 mln on the NYSE and only 846 mln on the Nasdaq. The Nasdaq should be over 1.2 bln, a shortfall of almost 30%. The big rise on low volume was an indication of no sellers instead of a rush of buyers.
Some say the bullishness was a result of the current round of merger mania. Etrade and Ameritrade were up strong on the rumor that Goldman Sachs was in the market for an online trading broker. Telecom Italia was the target in the telecom group today and it served to bump the entire sector as new targets were analyzed.
Retail earnings were strong today. Payless, Lows, Nordstrom, Best Buy all did well. BBY announced a 2:1 split as well.
Techs are back! All the major tech stocks were up strong on a flurry of sector wide news. IBM was up +6.31 after announcing a new super system on a chip. Faster, smaller, copper, 24 million circuits. By packing all the system functions on one chip the expensive interfaces and multiple circuit boards are eliminated. Of course if something breaks then you have to replace the whole chip. Dell found a bottom and recovered +4.75, SUNW +7.88, INTC +4.75, CSCO +4.94. Microsoft was the laggard posting only a +1.06 gain after new from the trial painted a bleak outlook for a win.
Don't hold your breath on today's rally. We could be experiencing the "buy the rumor, sell the fact" syndrome. Traders expecting a neutral stance or even a positive statement from Greenspan tomorrow could have helped power the rise today by attempting to get in early. After the big gains today it would not surprise me to see a choppy to down market tomorrow until the testimony is over. The text of Greenspan's prepared testimony will be made public just before the meeting. This is not expected to be the problem as Mr G. would not intentionally be seriously detrimental in print. The problem will be the pointed questions by the Senate Banking Committee. How he tap dances around them will tell the tale. Hopefully they will be more interested in asking about the banking reform package currently under consideration and less interested in his views on the market.
Futures are unchanged at 7:Pm so it does not look like anybody has changed their mind since the close.
Readers have already begun arriving for the seminar tomorrow and Wednesday. It is very exciting to meet everyone and we are looking forward to a great event. Still a couple seats left for the March 8/9th seminar here in Denver but if you are interested you need to contact Dana immediately at: