Good evening Sonki. I read and hear a lot about "capitulation" and "bottoms" lately ... and frankly, I think you may be partially correct, although not in the way you think.
I am amazed with the declines in tech stocks in the last 14 trading days following my post on February 5 here (where I set price targets for 13 stocks I might be interested in buying - maybe in July, I said). Already, there are three (Nortel Networks, Sycamore Networks and SUNW) that have entered the upper portion of my target range. Nortel is down 46%, Sycamore is down 30% and SUNW is down 28% ... yet I am not close to buying anything.
It would not surprise me to see another bear market rally at this point, although I would not bet on it. Actually, my opinion is that we had better see a rally (or some sideways action) almost immediately, or I am afraid we may all experience real capitulation (which is, I understand, always accompanied by both real fear and panic) - something we have not yet seen. We have seen a lot of pain, but that is not the same thing.
Technically, three major guides (to where we are, what is going on and where we are going) for equities look very fragile, and all are dancing just above critical support levels.
S&P 500 - now at 1246, if it falls much lower (say, to just the 1200 to 1210 area), it could enter free-fall to the 950 to 1050 area. Frankly, I think this is the greatest danger.
DJIA - now at 10442, if it goes below 10200, could also hit free-fall and hit 9650 in a heart-beat and then 7500 to 9300.
Nasdaq Composite - now at 2263, if it takes-out 2224, could quickly hit 1891.
As far as the chart you posted about 1998 vs today, I think we are way beyond that from a fundamental view. In 1998, the U.S. economy was healthy, where today it is falling apart, and quickly.
Personally, I think that when this is all over, we will have experienced the worst economic recession and stock market slump since the early 70s. Maybe I will be proven wrong - we better all hope so.
Disclaimer: The above is my personal opinion. I recommend that you do not base your investment decisions solely on any one person's views or analysis (including mine). Do your own research and take personal responsibility for your investment decisions.
Ken Wilson |
