October 15, 2008
That's the other thing about bear market rallies. They don't last long. Today: Dow down 7.9%, S&P down 9%, Nasdaq down 8.5%. More than 97% of the volume on the NYSE was in stocks that declined in price.
The frozen credit markets don't appear to be improving and may even be getting worse. But it's not just the financial crisis that's hammering the market. The real economy is tanking, too. Real retail sales in September (figures released today) are down 4.3% from a year ago. Consumer spending is something like 70% of GDP, so falling consumer spending confirms what we already know: we're in a recession. People have stopped taking out home equity loans, so they have less money to spend. And people are increasingly pessimistic about the economic future, so they're hanging on to what money they do have.
Except for the occasional short-covering rally, it's hard to see how stock prices don't continue to fall from here. Who's going to buy? And there are still lots of potential sellers. Most people have been hanging on to their stocks, hoping for a rebound. At some point, they'll start selling in earnest. Then look out.