Eric, I came up with the number from both technical and
fundamental analysis:
T.A: The sign of bottoming out is clear. The real low
in May was 3034 (or 3024 I dont remeber). NASDAQ
has been dropping like a rock. But when it reached
3000-3200 level, it has been tremendously resilent
to any further downside. In fact, we only dropped
something like 97 points yesterday (in that kind
of environment) was a sign that bottom was near.
The trading volume has been big in recent days, but
we closed almost at Monday's level. Compared to the
August slide and early Sept slide, this shows fund
managers are really starting to load the tech shares,
as evidented by the strong support for CSCO at 50.
Capitulation followed by a big turnaround with huge
volume has been a good indicator that bottom has
been reached.
4000 looks like a big hangover resistence, that's
why I use that as a target.
F.A: So, purely from T.A's point of view, I can be almost
90% sure that bottom is gone. The reason I put only
70% for 4000 really comes from the F.A.
Fundamentally, like I have said many times here, the
only thing this market has not been dicounted for is
a recession in 2001. Anything else, the market is
undervalued. As soon as people see that economy is
still in good shape, money will flow back to tech.
Why do I think economy is not likely to go into
recession? Let me ask: Have we seen the hard
evidence that economy will go into recession in
2001? Aboslutely not! People are just speculating
at this point. Lots of what ifs flying around.
JNPR and GLW sure do not see any weakness in telecom,
and ARBA will mot likely not see any in B2B. Even
INTC's warning does not point to any kind of recession
any time soon.
The reason I dont have 90% confidence here is, yes,
because of Mid-east conflict. But world has changed
a lot since 80s. Even the mighty Berlin wall was
gone. Dont jump into conclusion fast. Arafat is playing
the game to get more than he has been offered (BTW,
I am not going to engage with any kind of political
discussion here). We will see what weekend could bring
to us.
So, for now, I am assigning 70% chance for the 4000 target.
If mideast situation calms down, my confidence will
go up to 90%. |
