As many know, I chart out long views 5 or 6 times a year. I tend to be off some on interim target dates and NASDy levels, but have been pretty close on final destination dates and levels. Deciding where individual stocks run to is not my strength but the market as a whole I can generally target within 1 to 14 days.
There is a very minimal chance (about 5%) that we could still get a surprise run to 2550 in the next 3 weeks, but by July 4th, we'll see whether that possibility remains.
Odds are much greater that we'll see a scenario closer to this:
Last Thursday, the first day of summer, was the summer high. This week, the only bull days will be part of Thursday and all of Friday.
I expect to see 1650 by July 12 and 1350 by July 18. Expect one-day bounces off the tops or bottoms of successive NASDy gaps to the downside.
Be ready for an extended approximately 3 wk squeeze after that.
From some day mid August (approximately August 9), the downtrend will continue and culminate during the final week of September. This low will fall in the range of 514-1025 with my best guess at 770.
From there, my best guess is to close the year at 1283.
This is not strict TA nor is it mere tea leaf reading. Part of it is based on percent declines established historically off bubbles and mathematically from exponential curve collapses. Beyond that, my conclusions are based on chart lines.
To gain an idea of my parameters, use a 2 year NASDy chart. Draw a line from the peak of the 3rd week in March 2000 through the Sept 1, 2000 peak and extend it down to the right chart edge.
For your second line, start at the 2 low tips of April 2000 and run through the May 2000 low, extending this line to the bottom edge of the chart.
These two lines should look parallel. We are not likely to touch the upper line till the market level touches the bottom line again. Had we dipped to about 1375 in April, we would have bottomed.
But the semiconductor projections indicate no recovery in that sector till January, so the market bottom occurring a quarter early, to rise with the anticipated semi rise, conforms with my projected bottom. The 3 week rise in August conforms to my belief that Greenspan will do a surprise cut early in August, of 1/4 pt, to stem the bleeding.
My actual bottom number is derived from both the chart lines and the projection that NASDy will lose 85% from the bubble top. My late Sept bottom date permits a 3 week rise into earnings in mid October.
If there's any Fibonacci specialists willing to compare those cycles to see if my target date is close, I'd appreciate the effort.
Besides the obvious trading strategy in this period (short often), I can draw a few other conclusions that may help us trade:
1) Pay attention to what rises on big volume Thurs & Fri & Monday. Institutional window dressing will show us where the big guns are betting.
2) This period will be the great washout in tech. Institutions will not touch the money burners and only a few, such as EPNY or KANA, may be bought out. I expect we'll see the EXDSs and NAVIs dissolve into bankruptcy.
3) Longs should look for the tech plays that are profitable or within 6 months of profits, with decent growth rates, that have overcome inventory buildup problems.
4) Expect software price wars to weed out the weaker competitors.
5) Break the telecom habit. Most FOs and telecom suppliers are at risk here except the best managed ones with good numbers.
6) Expect the funds to buy tech as the lowest percentage of portfolios that has been seen in 7-8 years... in fact, expect vast amounts of institutional shorting to occur.
7) Funds will most likely be buying the strongest sectors of the past qtr. so look for entries on pullbacks of gaming, educational software, oil, gas, coal, etc. Also hot toys for the pending Christmas season. And what do folks buy in recessions? Booze, entertainment and gambling. Bonds.
8) The DOWdy will also be hit. In recessions, folks don't buy homes and new cars; used car companies will likely do fine.
9) Small cap value plays work best; brush up on Buffetology.
10) The biggest pigs die last. Short the lesser pigs that institutions shun.
11) Get the hell out of margin and cut losses quicker than ever.
I hope some of this guidance proves useful. I doubt it'll be over till one of our two chart lines get touched. Best of luck to ya. |
