Deal With The Present; Look To The Past
“It is
my interpretation that odds favoring support will be broken and
‘waterfall’ type action could occur down to the July 24 lows. We
would then reevaluate from there.”
Those were my words from my report
on Sept. 17. The Dow is down over 800 points since that day. Major indices
are now at their July lows. So…time to reevaluate.
First, let’s deal with today. Today, the market stands in the most horrible
condition that I have ever experienced. I say this because this bear market has
been one long, arduous slow bleed. It has been worse than the ’87 crash. The
crash happened, and it was over in short order. This bear market has sucked you
in many times…only to spit you out. It has been brutal in time, brutal in
price, brutal in emotion, brutal in every way possible. Well, that’s if you are
the normal buy-and-hold investor.
If you have been following the lead of this report, you have had very little
pain, and if you followed some of the shorts I put out, you made serious buckos.Â
To be repetitive, nothing has changed. In fact, it has only become worse.
- The Nasdaq and Nasdaq 100 have
undercut the July lows.
(
CSCO |
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PowerRating) is now a single digit baby…and I
gather more to come. - The Dow has not only closed below
the July closing low, it has closed below the intraday low. - The S&P 500 is below its July
closing low, but still just shy of the intraday low.
I could go on and on. I could tell you
to look at the small-caps, the mid-caps, the large-caps, the bottle caps and the
polar ice caps. They all look the same. They have all had waterfall-type action
since Sept. 17.Â
To make matters worse:
- Sentiment continues to be complacent
for such a move. - World market averages are actually,
for the most part, doing worse. Japan is now below 9000 and Germany is in
freefall…not to mention Brazil, London… - Over 95% of all stocks are in
technically poor shape. - You can put up the “peace”
sign to show how many sectors are in decent shape. - Mutual fund cash, amazingly, remains
quite low. FIDELITY MAGELLAN is down to 0.5% cash. - The CSCOs, INTCs, ORCLs, SUNWs,
etc…are still owned more by the institutional crowd than at the highs of
2000. In case you don’t know what I mean…when these stocks break $10, the
big boys start unloading more and more so they will not be seen with too
much of these losers. The problem is that they own billions of shares with
nobody to sell to at present prices…thus, lower prices become inevitable. - More leading stocks have now failed.
On the back of a warning from
(
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PowerRating), the rest of the SCHOOL
group was taken out and shot. - The NEW HIGH LIST is a black hole.
- The NEW LOW LIST continues to
expand. - All major indices are way below
their long-term moving averages.
I can go on and on about what’s
wrong…like the Yankees getting their butt beat by the Angels…like the Knicks
losing Sprewell because he decided to punch out his boat…excuse me…yacht.
That takes us to the short term. As you know, I have been harping on the fact
that the only way this plunge could end in the short run is by a panic selloff.
Well…I think we are now getting close to the selloff. I have no idea what form
it takes. I have no idea how deep it goes. I just have this sneaking suspicion
that “the flush” could be close. I say this (yes, I am being
repetitive) because October has been the month of such “flushes,” but
has also been the month where markets bottomed. Nine times since 1950 the market
has put in a low in October. We will just have to watch and see. If it doesn’t
happen…it doesn’t happen.
Now, here is what I will need to see in order to call this leg of the bear
market over.
- A monstrous, huge, gargantuan volume
day in which the market dumps…only to reverse and finish either up or
close to up. I would expect 2.5 billion shares or more. - Dire, end-of-the-world-type talk. I
would imagine there would be talk of depression, war, bankruptcy…kind of
like we are getting now…but much louder. - VIX spiking not just to 50 but to
60, 70, 80…and higher. - Put/calls spiking into the 1.20
range.
Please study the lows in October ’98,
Sept. 21, 2001 and July 24 of this year to see what I am talking about.
Nevertheless, even if the market follows this script…which would no doubt
amaze me even more, do not expect the fireworks that you had come to expect from
the ’90s. My best guess continues to be instead of a new bull market,
which every genius keeps calling for, it will be another bear market rally. But
I believe this one can be the best one of the past 30 months. Of course, I will
just play it as it comes.
I say this because I have gone on to an extensive studying campaign of previous
big bear markets. Amazingly, in this year of 2002, the market is acting just
like the start of the ’66-’82 period. This period was a secular bear market with
mini bull markets. This is a complete 180° from the ’82-2000 period where you
had a secular bull with short, mini bears. Fear and greed do not change just
because we are in another era. These very powerful emotions have worked the same
way since the beginning of time. And by the way, for all the economic junkies
who keep saying that when the economy gets better, the market will…I have some
bad news. The economy grew faster in the ’66-’82 period than the ’82-2000
period. HMM!
I know this all may sound horrible to you, but it doesn’t have to. If I am right
— and as of now, this is just a guess — you just have to work harder, be more
patient and pick your spots. During the ’66-’82 period, there were rallies of
50% plus many times. It just took 16 years to get out of the trading range.
There will be big winners, and of course, there will be big losers. Keep reading
Haggerty, Connors, Boucher, Landry, Floyd, Boroden, Truebenbach, and the rest of
the gang and I will promise you, if you follow their lead, you will not only
experience less pain than the rest of the world, but will more than likely
flourish.