"It's dead, Bob. Like Disco." That was the response of one trading desk to my usual round of middday email asking how business was doing and what was moving.
Technically, there is a specific problem with the market: for the last six weeks, natural buyers have almost disappeared.
What's a natural buyer? It's someone who doesn't have to buy (unlike a trader who is covering a short: he is being forced to cover), but buys because he sees opportunity.
What have we seen since January 1? Here's what:
--On days when stocks are up or sideways, volume is light;
--On days when stocks move down, volume picks up.
Traders, who watch these patterns carefully, have concluded that natural buyers are still scarce, and that selling interest is still not exhausted. That's what my trader friend quoted above means about today: it was a modest up day, but there was no buying interest.
Never fear. The markets--and disco--always return.
With that said, it was not a bad day. The contagion from worries about subprime writedowns at AIG confined itself pretty much to the insurance companies; brokers and financials were only modestly to the downside, and this gave bulls some cheer.
Also giving cheer to the bulls is the bull market in commodities, which is continuing to thumb its nose in the face of bears who insist that the global economic slowdown will surely bring down commodities. Energy and material stocks were among the biggest gainers today.
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