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Strategies & Market Trends : Technical analysis for shorts & longs

SPY 689.58

-0.3%

Jan 7 4:00 PM EST

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To: Johnny Canuck who wrote (37583)	7/12/2002 4:16:45 AM
From: Johnny Canuck	of 69563

A Trickle Becomes a Flood By Ron Taylor 7/11/2002 1:02 PM ET You are starting to see what happens when the mutual fund redemption trickle becomes a flood. People are receiving their statements for a quarter when the S&P 500 Index (SPX – 909.98) lost 10.5 percent, and the Nasdaq Composite (COMP – 1342.5) lost 15.5 percent. Obviously, some mutual funds performed even worse. When you tack on an additional 10 percent to the 27 percent SPX funds lost prior to last quarter, individual investors are about at the breaking point. When you lose a third of your retirement fund, and for some much, much more, natural instinct is to stop the pain. Stop the bleeding. This is going on in investors minds nationwide. Just like when greed took over in the last half of the 90s, fear is taking over now. As evidence I cite yesterday's 15-percent jump in the CBOE Volatility Index (VIX – 40.43). The problem with fear is sometimes it turns into sheer panic, and that is when you see what is euphemistically called a market correction. There are simply no buyers, the buyers are replaced by a tidal wave of sellers as people collectively yell into the phone "get me out!" I think yesterday's action was indicative of the beginning of this process. One thing that stood out plainly to me was that the Dow Industrials (INDU – 8672.3) lost 3.12 percent versus the COMP, which lost 2.34 percent. To me this clearly indicates that people are starting to sell out of the "blue chips". When fear grips investors there are no safe havens. Also notable, the Utility stocks as measured by the Dow Jones Utility Average (UTIL – 244.44) finished at a new 52-week low yesterday. This is more evidence of the same theme. The S&P 400 Midcap (MID – 438.04) and the Russell 2000 Index (RUT – 409.93) are both cascading lower. Completely debunking the theory that there is a stealth bull market going on, and that "most" stocks are going up. Both of which have been popular fairy tales that the media has been feeding investors to keep them in the game. The following charts show that that the analysts and the media were merely leading the lambs to slaughter. Good luck out there, it's going to get bumpy.

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