Reply #1: WrapUp by Martin Goldberg [View All]

[ozymandius]

Speculative Issues in a Speculative Market

“The Stock Market Broke on Wednesday!” That was the title of my Market Wrap-Up four weeks ago. Following that article, I was quoted in the same breath as Richard Russell, and the “Comstock Boys”, people for whom I have the utmost respect and admiration. I felt like a genius then. Today, based on a recent phone call from my friend Dave, I’m an idiot. The recent stock market action, consisting of a lower low and a heap of panic buying, although impressive, was not healthy. At the same time those fundamental market commentators painted as “perma-bears” are being ridiculed in some circles. That’s the way it has always been. The stock market is designed to fool most of the people. Unlike the Discovery Channel, in the stock market, avoidance of peril usually comes from not running with the herd. Has this changed?

I don’t think so. <cut>

Broadening Patterns Suggest an “Excitedly Active Public”

Recently, after the bull run of almost 1-1/2 years beginning in October 2002, there has been the appearance of broadening formations on the charts of some key leading stocks and indices. Although after last week’s rally, public optimism is at a high level, and those fundamentally bearish on the market are being dismissed as “perma-bears”. However, there are some indicators that soon reality will find its way to the stock market. This is shown in the appearance of several bearish “Broadening Top” patterns. <cut>

Is There a Greenspan Put? – Chart Suggests, “Not Necessarily”

It seems to be almost common knowledge that the Fed will do whatever it takes to levitate the stock market because this is a presidential election year. This is known as the Greenspan Put. The Greenspan Put is on the lips of practically everyone that works in money management and the financial media. This statement is also ringing in offices, health clubs, the mall and coffee shops in suburbia. It’s difficult for me to imagine how the overwhelming majority can be so right on an issue about the stock market! Many of those exposing the Greenspan Put, are citing historical trends in the stock market. But is there such a historic precedent? Below is a Nasdaq chart covering the last three presidential election cycles. Note the market action between the Blue and Red vertical lines, corresponding to January 1 to November during presidential election years.

<cut>
Of the last three presidential election cycles, the market went lower in two of them. Greenspan was the Fed Chairman through the last three presidential election cycles, yet the market went down during the 2000 election, which resulted in George W. Bush in office. The stock market also went down during the 1992 campaign to try to reelect George Bush senior. Senior was defeated and Bill Clinton took his first term in 1993. The market rallied in the 1996 election year when Bill Clinton defeated republican Bob Dole. So is there a Greenspan Put now? The charts do not support that there is a Greenspan Put. Yet why does the Greenspan Put seem to be on everybody’s lips? And why does it seem that everyone is thinking the same thing at the same time?

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