What Happened To All The Bulls?
By Lewis J. Borsellino
October 26, 2000 11:45 AM EST
The equity index complex was unable to sustain its positive open this morning, as sellers quickly regained the upper hand. The question moving forward is where this will stop? If the NDZ continues its selling, it would not suprise me to see that spill over into the SPZ and DJIA. If this were to occur, we could see a panic-type sell-off that would lead us through our recent lows.
One of the points I made a couple of weeks ago centered on the oversold conditions of the Nasdaq. At that time, the Composite Index was, on a closing basis, 21.8% below its 200-day moving average. The greatest such extension since the index came into existence. The two other events when the index exceeded 15% from the moving average were the Gulf War and the Asian crisis in 1998. What is bearish, I argued, is that this time there is not an external event leading us lower. In other words, this is old-fashioned selling, and there is little doubt that the market is now forecasting a recession in our economy's near future.
Now that I am off my soapbox, I'll give you my forecast for the rest of the session. Watch for a final-hour rally in both the NDZ and the SPZ. If this fails to occur, the SPZ should trade towards the 1280 level over the next couple of sessions. If the SPZ can get above the 1375 level today, go with it and look for the session highs to be taken out. |
