Where Was The PPT On Friday?

by: Barry Ritholtz

I have never been a big believer in the Plunge Protection Team [PPT]. The 78% drop in the Nasdaq from 2000 to 2002 was my proof.

So while some will ponder their presence (or lack thereof), let us instead review the recent activities on the Street of Dreams:

-Derivative woes have forced a number of hedge funds to blow up.

-The economy is slowing, as Consumer spending has significantly softened and Hiring continues to be weak.

-Easy Credit was formerly a source of lift to the markets, contributing to stock buybacks and M&A, and LBOs. Elvis has left the building.

-Technically, we have seen the first monthly reversal in a long time. Both the Dow and S&P July monthly close were below the June close
-- I believe this is the first time this has occurred since the cyclical bull began in 2003.

-Dow Transports have broken below 4994, and are now confirming a Dow Theory Sell Signal

-And, all the fun in Housing -- ARM resets, defaults and foreclosures, CDO issues, hedge fund blow ups -- are still far from done. ARM resets won't peak isn't until Q4 this year . . .

The Financial sector, as a whole, looks to me like it has a lot further to go. So too, believe it or not, do the homebuilders. I expect to see the same misguided and erroneous defense of the financial
sector that we saw on the homebuilders at the very first sign of any
oversold bounce.

Things are really starting to get interesting now . . .


5 year Dow monthly chart

1 year Dow Transports Chart