Ron R.
In a market panic you can throw all technicals out the window. This is looking more and more like a panic after todays carnage all over, yet the VIX (put option gauge indicating fear) is still only at 34. In 1998 it got all the way up to 60. In 1987, worse than that. Many large issues are starting to break down, this could mean some kind of end to the carnage is out there since the large caps usually are the last to tank at correction or bear market ends. Also, the ARMS index is near 10 year levels indicating possible near washout levels. On the other hand, many of the large caps are breaking head and shoulder necklines, in fact the whole computer index did so today for example, and the telecom index is about to. The downside measurements in those cases are at much lower levels still. This has the sickening possibility of getting way worse than most anyone thinks. The election outcome could be determined this spring or summer at this rate. Usually it is the year after an election that has a bad historical track record, but this market has been breaking all the rules for a long time now anyways.
In 1998 I had the misfortune of owning some oil service stocks and never fully recovered since. The bollingers and stick supports were supposed to hold there as well, but the whole group became enveloped and overwhelmed by too much to hold. A lot of them wound up down 80% and more and stayed there for nearly a year. Not saying that has to happen here, but the last time the Fed tried to engineer a soft landing in 1994, the average p/e for the S&P 500 was below 20. It is still close to 30 here, with the fed funds rate closing in on the '94 level.
I agree that a rally could come out of nowhere, that is common in bear markets. However, if the nasdaq falls another 500 pts. or so, do you really think the low 30's will hold up here? This has done nothing but outpace the general tech collapse, to wit down 28% in the last 2 days. I think too many now are counting on the "Fed Tuesday" to be the big turning point. Problem is, when too many expect it, like Bollinger and the rest fully expected the April 4 first downleg to be a major low, that is precisely the time to be the most cautious. The market will promptly start looking forward to the next Fed meeting in June.
By the way no one answered my earlier question about why Russ or Keister never bothered to attend the large and influential Chase H&Q Technology conference this week, or any other in recent memory. Is it too much to ask that this company go and make presentations in very important forums that increase exposure, at a minimal cost? I don't get it and never will. |
