Louis-re: "Hi!" + Paul Cherney's "Capitulation in Place?"
Many thanks for your charts and info.
Highly value your viewpoints, my friend.
Most agree that the NAS is quite oversold, including Paul Cherney.
See ya (unauthorized borrowing from donald sew...).
always,
di
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personalwealth.com
>>> Capitulation in Place?
Wednesday October 11, 2000 (5:03 pm ET)
By Paul Cherney, S&P Market Analyst
NEW YORK, Oct. 11 (Standard & Poor's) - Wednesday's market satisfied all of my ingredients for a recipe for a capitulation, but that doesn't mean that the NASDAQ just turns on a dime and heads into the stratosphere. It means that we are within a few trade days of the bottom.
Could it have been Wednesday? Yes, but it could also be Thursday or Friday, too.
Emotions are very high, and the NASDAQ can flip and flop over the next 5 trade days. Just look at a chart of the NASDAQ the last time we had an end-of-day equity only Put/call ratio higher than 0.75, that was on 5/19/00, but the actual closing low for the NASDAQ did not occur until 2 trade days later, and that close represented a 6.66% loss (close to close) from the 5/19/00 close. If this market duplicated similar performance then it would close Thursday's market at 3024.72.
The point of this example is to document that capitulation levels of P/C ratios don't necessarily happen at the exact bottom, but they are a sign that the bottom is close at hand. If today's market duplicated the worst low print for the NASDAQ (after the 5/19/00 signal date) then on Friday, we could see the NASDAQ printing an intraday low of 2908 but then rebounding 12% to finish at 3270. (A 12% rebound is highly unlikely in today's market due to the lower levels of volatility, Not OEX option volatility as measured by the VIX, simple price volatility in the NASDAQ is lower now than it was back in May.)
For Thursday, I expect to see another dip in prices which may or may not generate a rebound. I think, though, that prints under 3042 could cause a sharp, intraday drop that brings in buyers at sub 3000 levels. One model I run is predicting that the NASDAQ has risk to print all the way down to 2982.
None of my models or indicators can predict earnings warnings so that is a wildcard. Once a rally begins, anything to the upside will only be considered a short-covering rally, they usually last only 1 to 4 trade days.<<< |
