DIABLOMARKET COMMENTARY for the week ending 12-01-00
Pain: the only word to describe NASDAQ activity this week, as
some signs of panic (finally) seemed to show on Thursday. High
volatility and almost unbelievable discounting of prices is
action usually seen near the bottom of a Bear phase, but
unfortunately other indicators still do not indicate historically
similar signs of capitulation. The NASDAQ lost 260 points for
the week, slicing through support level after support level as if
they weren't there (they weren't!); The DJI gave back about 96
and the S&P 500 about 27.
As we mentioned briefly in the Diablostocks.com news item of 11-
30-00, Investors' Intelligence figures still show 55.2%
Bulls...This is a figure we believe to be the danger level
signaling a downturn to come in OVERBOUGHT markets! The put/call
ratio at mid-day Thursday was about 175%. Again, this is not a
bearish figure, but not the 200% to 300% we want to see. The
volume and price action was the only positive technical aspect
this writer saw Thursday, 2.6 billion shares being the second
highest volume day in NASDAQ history.
We hope for a successful test of the Thursday NASDAQ, DJI and S&P
500 lows next week. If tested successfully, we believe a strong
rally could follow, but this rally should, in our humble opinion,
be viewed with healthy skepticism. Any rallies in this market
will likely be trading rallies: Short term in nature. The failed
bottom on the NASDAQ from October and the second week in November
loom large...broken bottoms like these usually require some give
and take for rebuilding...and historically do not end with
a "V": down down down followed by up up up..
The DJI and S&P 500 continue to show much better relative
strength than the NASDAQ. The DJI continues to be several
hundred points above its seasonal low, and the S&P 500 stubbornly
clinging to the 1300 level.
TECHNICAL COMMENT
The NYSE posted only 127 net decliners this week, while the
NASDAQ posted 3995 net decliners. More of the same it seems.
Our reluctance to pick NASDAQ support levels in this Grizzly
market continues this week, with the exception that we hope for a
test of Thursday's lows next week. The sooner the better, as we
believe a successful test will bolster some confidence levels and
hopefully bring some buyers back to this market. Friday's
intraday rise and fall was, we believe, indicative of the lack of
confidence..."buy the dips, but don't hold 'em over the
weekend!" Exactly how much of Thursday's rebound and Friday's
rise was short-covering is anyone's guess until short interest
figures are released. We will be watching. What a bear!
General sources indicate that Mutual Fund cash levels are quite
high at about 9%. This is a bullish sign, as Mutual Funds are
generally fully invested at the top, and have too much cash at
the bottom.
The market needs to get past the tax-loss selling season for
individuals: we believe this selling will serve to keep the weak
groups weak, and keep any rallies short term in nature.
We also believe that the Fed may be near to adopting a neutral
bias on interest rates, but we also believe that, not wanting to
play politics, the Fed will likely make no changes until the
election mess is settled. Both of these may have a positive
effect on the markets around the turn of the year. Stay tuned!.
DIABLOFACT TO PONDER
Did you ever wonder why the Boulevards in the Western US are so
wide, even in many of the older cities?
The Mormons, who settled and/or influenced the development of a
multitude of Western cities, had a smart and forward looking
rule: The main drag in town had to be wide enough to turn a 16-
mule-train around in one shot. Thank goodness for the 16-mule-
train! What would traffic have been like without it!! Ponder it!
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