Any comments on the following author's opinion that a rally is likely. He's not ultra bullish, but thinks a temporary bounce for a few weeks is in the works. He makes some good technical points, IMO.
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NICK'S PICKS
A Decision Point Publication
By TraderNick
March 3, 2001
Market Overview:
Back in the early 1960s, and perhaps it's still the rule today, no one seeking
admission to West Point could have a horse, a mustache, or a wife. Another
ground for disqualification was "extreme ugliness." Needless to say, today's
stock market wouldn't get in.
Technically, psychologically, and emotionally, this market is ready to rally.
It wants to rally. It NEEDS to rally. But every time it tries to rally, one
thing or another comes along to sabotage the effort. Last week was a case in
point. On Monday traders jumped on a prediction of an early Fed rate cut from
former Fed governor Wayne Angell and used it as an excuse to run the market
up. But after Fed Chairman Alan Greenspan showed no inclination to make good
on his former underling's call, they ran the market right back down again.
Then, just as technology stocks looked as if they might put in a short term
bottom, software bellwether Oracle came out with an earnings warning that
pulled the house down. For the Dow industrials the week was pretty much a
push, but the Nasdaq took yet another fearful beating, off more than 6%.
The coming week promises be a fateful one and it's important that things be
resolved to the upside, at least in the short term. I won't dwell on what will
happen if they're not; suffice to say that the broader market would achieve
official bear status and the Nasdaq would see sub 2000 prints.
Let's talk instead about some of the positive signs out there:
Friday's intraday lows for the S&P and the Nasdaq tested but did not dip below
Thursday's intraday lows.
TRIN (Arms Short Term Trading Index) is bullish.
Mutual fund flows remain healthily net positive, and while the bulk of this
fresh money has not been put to work in equities, it has piled up in fund
money markets and is a source of buying power once managers locate their
missing backbones.
The Nasdaq is as far below its 200 day moving average today as it was in early
January when it began a nearly 25% rally.
If the S&P can hold the line at current levels it will put in a W shaped
double bottom formation on the daily chart, with a first bottom of 1215.45 on
2/23, a second bottom of 1214.50 on Thursday, and a mid-spike high and pattern
"confirmation" point of 1272.75 on 2/27.
The "Fear Indexes," VIX and VXN, are short term overbought and at the tops of
their short term regression channels, suggesting higher ST prices for both the
broader market and the various technology sectors.
Both the S&P and the Nasdaq are sitting on ST Fibonacci time lines. In my
Thursday night update I noted that these indexes and most of the technology
subsector indexes would hit the Fib date and added, "Look for either immediate
reversals to the upside, or a final print on the downside, then a reversal up
on Monday." One of the sector indexes, the semiconductors (SOX), did
immediately reverse on Friday. We'll see how "final" those downside prints on
the rest were come Monday.
If we do indeed get the rally these signs point to, I don't expect it to be a
long lived affair, rather something along the lines of a few weeks. For long
term relief we need clear signs of (no, not more Fed rate cuts) a
strengthening economy and an improving corporate earnings environment. But a
rally here, even a short term one, could be quite powerful as bear market
rallies go, would certainly be tradable, and would relieve some of the
pressure and some of the gloom and doom that currently threatens to push this
market the rest of the way over the precipice.
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