I’ll Be Back

• July 25, 2002
• Dan Chesler

In the movie “Terminator,” after Arnold Schwarzenegger
tells the desk clerk, “I’ll be back,” he returns by crashing a
monstrous vehicle through the front of the building. Let’s hope the market
doesn’t return to yesterday’s lows in the same manner as Arnold’s famous
character returns to the desk clerk. There could be times were it will feel that
way, however. While yesterday’s action goes a long way towards establishing a
sturdy, cyclical low, the chances of another scary retest are still very real,
in my opinion.

Price momentum (+6%)
and volume (2.77 billion shares) were both excellent yesterday — indeed they
were both historic. However the market had only so-so breadth, with NYSE
Advancers leading decliners by a tame 1.5 to 1. These numbers will definitely
need to improve in the days ahead. Another thing that bothers me is the number
of people on CNBC yesterday and today, yapping about “the lows are in.” In sum,
while I am very encouraged by yesterday’s
rally, I expect a retest of Wednesday’s lows at some point in the days and/or
weeks to follow.
 

Japanese iShares appear to be making some
effort at establishing a higher low on the weekly time frame. This pattern comes
on the heels of a weekly triple divergence between price and 5/35 MACD momentum.
This could be an interesting long-term buying opportunity, with a target over
10. 

Meanwhile,
Biotech
(
BBH |
Quote |
Chart |
News |
PowerRating) continues to be the strongest
industry sector I follow. I am looking to re-enter long trades on any weakness
in the BBH.

Cheers

Dan