One of the most interesting articles I read this week was an observation by the ever insightful Mark Hulbert that we’ve had three 9 to 1 up days in the last 3 weeks: Friday Aug 17, Wednesday Aug 29 and Friday Aug 31.
Friday Aug 17 was when the Fed cut the discount window rate by 50 basis points before the market open after the market route the previous day.
Wednesday Aug 29 was last week after a big selloff on Tuesday. A letter from Uncle Ben to Senator Schumer published in the afternoon kept things going.
And Friday Aug 31 was last week as well when Bush and Bernanke said they feel our pain.
I think the big up day on Friday Aug 17 made sense.
But the last two strike me as possibly a buying panic. I mean that’s pretty weak news and pretty strong bullishness.
Hulbert cites famed technical analyst Martin Zweig and some academic research that such events are bullish and tend to precede short term upward moves in stocks.
But, taken in context, I think it could have a different meaning this time. I think it could signal a buying panic, an overwillingness of investors to jump back into stocks too quickly after a big downturn for fear of missing out on big gains. It’s the kind of thing you’d expect to see at market tops, not bottoms.