Tuesday, August 28, 2012

Drip... Drip... Drip... Dow Bleeds from Small Wound; NASDAQ at 11 1/2 Year High

It was the best of times, it was the worst of times...
-- Charles Dickens, A Tale of Two Cites

So it goeth... in the best Dickensian sense, the NASDAQ and Dow have diverged of late, forming an odd dichotomy, reprising the 2000-era old/new economies.

As the Dow suffered its sixth loss in the last seven sessions, the NASDAQ returned to the halcyon days of 2000, when, on its way through one of the worst crashes in market history it closed above 3100 for the last time, on November 15, 2000, on its eventual way to a bottom of 1419.23 on September 21, 2001.

So, for the NASDAQ, it is an 11-year, three month high, give or take a few days.

While the Dow is still within hailing distance of its own multi-year closing high (13279.32, May 1, 2012), it is down roughly two percent from there with losses mounting since the 68-point drop on the outside day last Tuesday.

The difference between the two indices is probably is risk assessment, or the mere fact that Apple (AAPL) is not a Dow stock. Had it been for, say, the last two years, the Dow Industrials might today be sporting a 15,000 handle, but, alas, the riggers of the Dow 30 apparently see Apple as unfit for inclusion, despite being the world's largest corporation by market cap.

The makers of the Dow components have a history of not being exactly of the genius character. For instance, Ford Motor Company has never been an elite member of the Dow club, despite a stellar record of accomplishments and great gains through the 20th century.

Whatever the case, the differences in how the averages are structured and weighted makes for interesting interplay as the stodgy Dow companies, what with their dividend-paying stocks and generally long track records, grind slowly in one direction or the other, the NASDAQ offers more high-fliers, jocular IPOs (like Facebook, Groupon and Zynga, to name just a few) and many small niche players, thus being the desired place for the sport of day-trading and point-splitting by the HFTs, hedgies and other mindless market cyborgs.

Once again, as has been the case through almost the entire month of August, there was little in the way of data or news to shake traders out of or into positions. The Case-Shiller 10-and-20-city index of home values showed another smallish year-over-year gain, though the August consumer confidence reading of 60.6 - down sharply from last month's 65.4 - did arouse some traders momentarily from their checker-playing, book-reading or whatever worthless activity keeps them in attendance these days.

After a few moments of excitement, however, they'd had enough and went back to the business of not trading, allowing the computers to do their dirty handiwork behind the scenes and away from the incessant snoring.

It was, again, quite the snooze-fest, and one has to wonder if traders will be back on their toes after the Labor Day recess or whether this kind of low-volume, low volatility regime is all part of a new normal that precludes individual investors.

There is a bit of tension over Friday's speech by Ben Bernanke at the Jackson Hole economic symposium (how anyone, and especially an army of seasoned traders, can get excited about one speech is yet another matter) and the news that ECB president Mario Draghi - citing a "heavy work load" - bowed out from attending.

We're happy that Mr Draghi is working hard at whatever he's doing, purportedly hammering out a deal with the German Bundesbank to save Europe from imminent collapse, though one might also assume attending important economic events such as Jackson Hole has come to be known, should be on his agenda.

At least Mr. Draghi has a job, something roughly 20% of Greeks, Italians and Spaniards do not. It is everyone's hope that he and other Eurocrat leaders concoct a suitable rescue plan for Europe and the rest of civilization before the world ends on December 21, according to wild-eyed gloom-and-doom types eyeing the Mayan calendar, because, if they don't, it will be too late.

Perhaps its for the best that the markets and traders take August off, like their politician friends in Washington almost always do. Wall Streeters can join congress with an approval rating of under 10%. Nearly everyone else - about 9.98% of the population - could care less.

Dow 13,102.99, -21.68 (0.17%)
NASDAQ 3,077.14, +3.95 (0.13%)
S&P 500 1,409.30, -1.14 (0.08%)
NYSE Composite 8,032.72, -3.53 (0.04%)
NASDAQ Volume 1,335,361,880
NYSE Volume 2,499,501,000
Combined NYSE & NASDAQ Advance - Decline: 3147-2303
Combined NYSE & NASDAQ New highs - New lows: 152-51
WTI crude oil: 96.33, +0.86
Gold: 1,669.70, -5.90
Silver: 30.88, -0.17

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