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Can Erik Estrada Save the Stock Market?

By Jeff Clark
Thursday, January 17, 2008

"Breathe, damn it, breathe!"
 
In an episode of CHiPs – an old TV show about California Highway Patrolmen – Francis "Ponch" Poncherello (played by Erik Estrada) pulls a drowning motorist out of a car that had careened into one of LA's water canals.
 
The victim is unconscious, and as Ponch is performing CPR, the camera zooms in tight on our hero's face. He shouts out "Breathe damn it, breathe!" Within seconds, the motorist is conscious.
 
Ponch saved the day.
 
So I tried that same technique this past Monday. The stock market was trading sharply lower. Shares of Merrill Lynch (MER) were trading lower as well. I stared intently at my quote screen and shouted out, "Breathe damn it, breathe!"
 
Yesterday, Merrill Lynch inhaled.
 
Even as the market opened lower yesterday morning, MER shares opened higher and rallied throughout most of the day. That's good news for the stock market – at least for the short term.
 
The stock market is viciously oversold. And it's logical to expect a bounce at some point. But we've been oversold for the past couple of weeks, and anyone betting on a bounce during that time is as underwater as the hapless motorist in the CHiPs episode.
 
Now, however, MER, which I consider a canary in the coal mine, is signaling that it might be okay to head back into the market.
 
I wouldn't stick around too long though. The major averages have suffered a lot of technical damage. Markets don't just shrug that off and reverse course. So any gains from here are going to be temporary.
 
However, given the powerful downside extension we've seen over the past few weeks, any snapback rally is likely to be equally as powerful.
 
If you're short stocks, then this might be a pretty good time to take some profits off the table. If you're long stocks and looking for a chance to get out of a few positions, then you'll soon have a good opportunity to do so.
 
And if you want to speculate and try to profit off of a bounce, then now is the time to make that bet.
 
At least the canary thinks so.
 
Best regards and good trading,
 
Jeff Clark




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European banks don't... UBS, Credit Suisse, and Deutsche Bank at new lows.
 
Semis find another cliff to dive... KLA-Tencor, National, Micron, Taiwan Semi, and Broadcom make new lows.
Market Watch
Symbol Price
Change
52-Wk
S&P 500 1221.53 +1.3% +10.1%
Oil 38.31 +1.4% -0.6%
Gold 138.07 +2.1% +16.3%
Silver 28.60 +2.4% +53.6%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 18.01 -7.1% -19.8%
Gold Stocks 581.56 +3.0% +17.0%
10-Year Yield 3.02 +0.7% -10.7%

World ETFs
Symbol Price
Change
52-Wk
USA 122.89 +0.3% +11.3%
Canada 30.50 +0.2% +16.2%
Russia 21.94 +1.4% +18.1%
India 37.85 +0.3% +22.3%
Israel 16.69 +1.3% +10.8%
Japan 10.64 +0.6% +6.5%
Singapore 13.73 -1.1% +18.8%
Taiwan 14.78 +0.4% +19.2%
S. Korea 57.31 +1.3% +23.4%
S. Africa 71.87 +1.4% +28.2%
China 44.42 -1.4% -0.6%
Lat.America 53.17 +0.7% +8.4%

Sector ETFs
Symbol Price
Change
52-Wk
Oil Service 137.59 +1.0% +18.9%
Big Pharma 64.14 +0.0% -3.2%
Internet 72.07 -0.1% +23.4%
Semis 16.22 +1.2% +29.4%
Utilities 31.28 +0.2% +1.5%
Defense 18.52 +0.1% +10.6%
Nanotech 10.03 +0.4% +1.6%
Alt. Energy 10.08 +1.3% -3.3%
Water 18.49 +1.0% +14.5%
Insurance 16.14 +0.4% +21.1%
Biotech 20.54 -0.2% +28.1%
Retail 19.70 +0.3% +30.2%
Software 24.79 +0.8% +25.9%
Big Tech 53.87 +0.3% +22.7%
Construction 13.10 +0.9% +15.7%
Media 13.64 +0.5% +26.0%
Consumer Svcs 67.39 +0.2% +24.5%
Financials 55.04 +0.3% +7.4%
Health Care 64.30 +0.1% +2.0%
Industrials 63.54 +0.5% +21.0%
Basic Mat 74.35 +1.1% +25.3%
Real Estate 55.32 +0.1% +25.0%
Transportation 91.77 +0.7% +26.9%
Telecom 22.59 +0.5% +17.8%