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Strategies & Market Trends : Rande Is . . . HOME
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To: Rande Is who wrote (44830)1/7/2001 7:10:01 PM
From: DlphcOracl  Read Replies (6) of 57584
 
Is there anything wrong with my thinking?

With NASDAQ at 2400, possibly retesting recent low of 2280 this week with more earnings warnings and misses, it seems as if this is the perfect time to start buying the NASDAQ QQQ Index. My thinking is as follows: (1) we are ten months into the technology bear market; in the absence of rampant inflation or unsettling international events, bear markets rarely last more than one year; (2) NASDAQ is already 55% off of its March high, a decline comparable to 1973-74 (when inflation was rampant and oil prices were sky-high); (3)Alan Greenspan and the Fed have signaled their intention to aggressively cut rates in an attempt to prevent recession (or at least minimize it).

Since the next support level for the NASDAQ is 2100, if NASDAQ drops to 2300 again the downside risk is 10%. However, looking ahead one year, I do not think it is a stretch to see the NASDAQ at 3400-3500 in early 2002 after AG and the Fed reduce rates and add liquidity to the economy. That is a 60% gain in 12 months if this plays out.

At first blush, it seems as if the risk/reward ratio for buying the QQQ's as a LT investment is a no-brainer. However, this seems too easy and there must be some flaws in my reasoning. Is there anything wrong with my thinking?

Any opinions or comments from the thread would be appreciated.
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