No Clues Yet
Just got back
from a Bill O’Neil workshop. I think it was my tenth. Spent the bucks
because I needed the therapy. I will never ever get tired of hearing the same
things over and over again from the master. That’s why I will continue to be
repetitive in my reports until the end of the bear market. Repetition is the
mother of skill.
So when I have tried to drive home the
point that all the big days the Nasdaq has had over the past few months would
most likely lead to nothing, it was not to drive you crazy or depress you. It
was not because I am a “Cassandra” or “Permabear.” It was
because of all the rules that were drilled in my mind by the master, and others.
One important rule I have learned over the years was how bear markets end,
especially deep ones. I have a question for everyone: Do
you think the markets are going to accommodate everyone by ringing a loud bell
at the bottom? I don’t think so. The bell didn’t ring at the top.
Just ask all the analysts. Last Wednesday’s monster day was too loud for my
taste. Just about every analyst on CNBC and in print were talking about the huge
day, the heavy volume and the Fed. They rolled out targets for the year 2001 and
all kinds of historical information on how the markets have
to do well because of the cut in rates. Maybe this will be the case, but there
are problems.
Most of these analysts were bullish
back in March, so their predictions carry little weight. But most importantly,
when you come out of a bear market, great stocks are in consolidation phases
already and close to breaking out. There are absolutely no sound consolidations,
setups or anything resembling them to speak of in “growth stock land.”
Most of the leaders of the past bull
market are still 50%, 60%, even 70%-plus off their highs. There has just been
too much damage done. Another problem! Every new bull market should have a bunch
of new names starting to lead. Nothing doing at this time. To make matters
worse, several leading sectors of the past few months appeared to have topped
last week. Take a look at the charts of Health Care,
Insurance and Utilities to see what we are talking about.
So please, forget all the news and forget all the noise. I know it’s tough
especially with a day like Wednesday. On days like that, it is tough to keep emotions in check. That’s why it is so important to find a set of rules that
have stood the test in both bull and bear. Maybe the market will be much higher six months from now. If that’s the case, you don’t have to worry. The
market will give all kinds of clues. I haven’t seen any of them yet. To repeat
myself for the umpteenth time: Be patient and let the
market prove itself. Patience will keep you out of trouble during times
like these.