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Strategies & Market Trends : Technical analysis for shorts & longs

SPY 660.08

-0.8%

Nov 18 4:00 PM EST

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To: shasta23 who wrote (34262)	9/18/2001 10:43:17 PM
From: Johnny Canuck	Read Replies (1) of 68115

Stefan, I am not so sure about that chart. If it was indeed a true head and shoulders, the amount of the decline would be equal to the height of the head which is 700 points. This would mean the index would go the negative 340. That is not possible. On the other side, I do agree about the bounce and then the decline. Part of the reason for this scenario is that the market looks like it has not priced in a recession yet. The market was decline as a result of this before last week's events. Right now it looks like the market will rally due to better earnings and revenue numbers as a result of the ramp for the Christmas season. This makes the quarter to quarter comparsions look good in light of the dramatic declines early in the year. This is not sustainable though without a more protracted reason for buy. Right now the last remaining engine for growth is consumer demand. The event of last week will reduce consumer demand as people focus on the events of last week. It will also be restricted by the fact that consumer debt rose 5 to 6 percent last month. There is a limit to how much consumer debt an individual can carry before they can't take anymore no matter how low interest rates get. I think 1540 on the COMPX might hold for now as so many people are watching it, but I think the bounce will be weak at best. Complicating the issue is the fact that triple witching is this week. Normally, most traders would have flatten their positions last Thursday, but that was not possible. So Thursday and Friday should be wild. Even the traditional end of quarter effect will be muted I think as holding cash makes the funds look smarter than holding stocks. The lower level on the COMPX will probably play out over the next 12 months as true bear market bottoms are not reached till consumer debt is reduced. As a result, I have a downside target of lower than here, possibly 1200. This all assumes we are entering a recession. If they can actually turn the demand equation around all bets are off. Keep in mind that there will still be strong stocks even in a bear market. GNSS is an example. They are still seeing strong demand as they are benefiting from the shift to LCD screens. The demand is being driven by health issues. LCD screens are easier on the eyes of the aging baby boomer who are working in their computer equiped cubicules. What multiple people will pay for such as stock is the issue though. There are very few of these types of situations. Identifying them is the issue.

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