From Record To Record On Wall Street

Fundamentals, technicals and sentiment. They’ve all been ingredients that have flavored the rich stew that Wall Street has been preparing the last several weeks, as the powerful recovery from last year’s bear market showed signs of fatigue.

The calendar has played a role, as well, and a prominent one. End one quarter and begin another, and what had been window-dressing by fund managers turns into profit-taking.?The history books weren’t left out:?The third quarter proved to be the brightest the bulls have enjoyed, with a 15% improvement in the Dow Jones Industrial Average (DJI), since the fourth quarter 1998.

Turn the page, and the?opening salvo of the fourth quarter plumbed the record books as well:?with a 203-point Dow loss, it turned out to be the?worst first day of a quarter since the first?frame of 2001.

You?ascribe the blame for the choppiness to any one of several factors:?technically, stocks have gotten as baldly over-bought as they’ve been in several years, suggesting the rally had reached some measure of fatigue.?

The sentiment, perhaps, got a little too euphoric.?The last two weeks, when stocks have been down far more often than they’ve been up – averages having fallen six of the last seven sessions -?investors stopped clapping because their hands have gotten sore.?

Fundamentally, the economic data has?come in on the disappointing side, especially?those readings of manufacturing and industrial conditions.?

So coming into Friday’s session, investors prepared to flinch at the jobs number they would see. While the forecasts had said we’d see the smallest decline in jobs in some 13 months, the anxieties proved founded: the job losses proved to be worse – much worse – than expected, coming in at down 263,000 instead of off 167,000. The unemployment rate climbed, as forecast, to a 26-year high of 9.8%.

So Wall Street is going to pay another heavy price in Friday’s session. ! Futures suggested the Dow could suffer another triple-digit setback, at least, with early declines in the 100- to 125-point range anticipated. There likely wouldn’t be much to staunch the bleeding during the session – no other catalysts to alter the fundamentals or the expectations. At some point, the technicals should show, the over-bought conditions have been alleviated, and then the market becomes a puppet of liquidity, as funds start to flow into the market from those players who missed the headiest part of the recent rally. But that could be some ways off.

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