by Lee Adler, Wall Street Examiner
Shallow Thoughts
Some folks have compared the rally off the lows to the 2009 bottom or the 1974 bottom. This one is like neither of those.
In 2009, the Fed started direct-to-Primary-Dealer QE in March. The market bottomed in March. It was simultaneous. The market responded instantly.
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This time, the Fed started direct-to-Primary-Dealer QE in late September, in massive size. They called it “Not QE.” It did not work.
So 2 weeks ago the Fed went from Not QE, to Panic QE, increasing direct to dealer QE by orders of magnitude. It still didn’t work.
Over the last 5 days, the Fed went crazy, pumping about $350 billion into Primary Dealer accounts. It worked only yesterday. Or maybe worked. We don’t know for sure, yet.
As far as the 1974 bottom, I was there. It did was a conventional double bottom of a tired, old bear. The first bottom was in October 74, successfully tested in December.
The crash in the summer of 74 was a low volume affair, 3-8 points per day on the Dow. Nobody saw it because after 6 years of a secular bear market, nobody cared. The ticker tape barely moved. Total NYSE trading averaged about 4-5 MILLION shares per day. MILLION. Not billion. A block trade was 5000 shares.
I’d lay odds here that this low, if it even was the low of this leg, was just the first of what will be a long grinding bear market.
Wouldn’t it be funny if in a day or two the market averages are 20% off their lows, what will the TV talking heads say? New bull market?
Probably won’t happen.
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