Simply Reading The Markets

I have been asked by more than one person over the holidays about what my biggest
worry was for the year 2002. I have to tell you it is the same worry I have had for the past 20 or so months.
Too much bullishness in the face of high valuations and
declining earnings. That is the fundamental problem that I have. Of course I am a technician, but it is the fundamentals that cause the
technicals — not the other way around.

If you have been a reader of my column and a listener to my radio show, you know one thing about me.
I follow everything. I try not to miss a beat when
it comes to opinions, news announcements, earnings, chart patterns…

I am a big believer in listening to the maddening crowd — especially when they are tipping one
way — so here is my biggest worry of 2002: The
maddening crowd will get it completely wrong again — and the maddening crowd is
extremely bullish. 

The same bubbleheads, the same donut-heads and the same boneheads that led you astray for the last couple of years are at it
again. By a ridiculously wide margin, they are bullish. Where the heck are the bears? I know
what you are thinking. Gary, come on. Be patriotic! 2002 has to be a good year. Well, guess what?
No, it doesn’t!

Be rest assured, I am not a bull nor a bear. I am as optimistic as anyone when it comes the market and the economy of this country. But ladies and
gentlemen, I am a realist — and when all the talking heads — and I mean all
— are bullish, well, let’s just ask ourselves an important question: When have the masses ever been right?  

One forecaster had the markets going nowhere, while five had the markets dropping. Why is this worrisome? Because without naming
names, (this is a new year and we must be nice…at least for a week) these strategists were not
just off the mark, a couple of my favorites missed the Nasdaq 5000 target by a mere 3000 points plus. Why should we believe their same permabull stance?

Another thought that comes to mind is that only one strategist, Doug Cliggott of J.P.
Morgan, got it right the last two years…and he is still bearish. I bet the horses by past performance…

Now on to the economists. Business Week polled 59 of them. I believe most of
them graduated the school of the Psychic Friends Network. Well, 57 out of 59 see growth in the second quarter, 59 of 59 see growth in the third. In
fact, the mean estimate is 3.4% growth. The problem…only one of them…a guy with the last name
Roach (no comment) called the recession…and Mr. Roach wasn’t even polled.

CNBC is next. I have one question. Did CNBC tell all the bears in the world that they can’t appear on TV any more, or are there just no bears left? I made
a point of watching and tallying up the interviewees and they all said the same thing…”I expect a good market in 2002 led by Financials and
Technology. The market’s recent action is forecasting a better economy and the Fed’s 11 rate cuts are going to work.
The bear market ended Sept.21.”

I have only one thing to say: Man, do I hope they are right! But the last time I saw everyone going one
way, the
Nasdaq was at 5100. Ouch!

Notwithstanding all this “stuff” (and it is stuff) I will continue to
do my job of simply reading the markets. If they want to keep going higher, I will
be on it, and if they want to be cheesed again, I will be on that too.