How Long Can It Last?

December 10, 2001
Gary Kaltbaum

I find myself asking myself a lot
of questions lately. The main question is about
how long can this rally last. You see, like you, I am still remembering
the 75% drop in the Nasdaq, and I am still
remembering that just this past
Sept. 21, the market hit bottom. It is still tough to believe that we are in a
grand, fabulous new bull market. But…the more important question has to
be whether
this market can get cheesed again. I am not talking pullback. I am talking
cheesed. After all, the technicals were shaping up in January and certainly
shaping up in the March/April period before the rug was pulled.

Last Tuesday’s action starting at 2:30 and the subsequent
action on Wednesday tells me…for this moment…the market gets the benefit of
the doubt. A few things happened: Volume
was monstrous. This was not Aunt Mary and Uncle Bob purchasing shares. It was
the big institutional crowd. The NEW HIGH LIST expanded
to over 300 before pulling back. This simply means more names are starting to
participate. More and more names came up the right side of their bases setting
them up for future breakouts. All this action insures nothing. It is just my
reading of the markets.

Over the many years I have been doing this and over the
many years I have studied, this type of action usually means that there are more
and more better days to come. There has to be a caveat, though. Hey, there
always is…and that is while stocks are breaking out to new yearly highs, it is
not like 1999 again.

Those breakouts happened at all-time highs. Many names
that have recently broken out are still 50% off the highs of 18-24 months
ago…meaning longer-term resistance…meaning more volatility and an extra
exercise for all of us. What exercise? I not only look at one-year charts…I am
now also looking at two-year charts to see where the longer-term resistance
lies.

In the meantime, do not ignore some of the things that I
have said about sentiment. Sentiment usually lags. I do not like the fact that
bears are at there lowest levels in months, the VIX and VXN are dropping
big-time and lower priced, frothy stocks are on the move.

Like the RESTAURANTS,
a bunch of HOMEBUILDERS have either moved to
new highs or look poised to. All have technical work left to do.

(
DHI |
Quote |
Chart |
News |
PowerRating) has come straight up. I would love it to put in
a handle right here.