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Strategies & Market Trends : John Pitera's Market Laboratory

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To: John Pitera who wrote (4682)	9/24/2001 10:06:01 AM
From: John Pitera	Read Replies (2) of 33421

9/24/01 8:43 AM ET From our Morning Report by Stephen Sherwood: News events and extreme technical readings as well as the triple expiration dominated Friday’s session. This led to very high volume and a lot of price volatility. Early selling abated after General Electric (GE:NYSE) announced an optimistic outlook. Clearly, the market was groping for some good news. The ensuing rally faded later in the day as traders worried about war, recession and the weekend. The option indicators were the most extreme with VIX going over 57 for the first time since the 1998 October low. The IBD put/call volume indicator closed at 1.21. That is the highest reading ever recorded since tracking began in December of 1985. New yearly lows were over 700 on both the NYSE and the Nasdaq. Negative ticks were not terribly extreme because of the midday rally attempt. Do all of these extreme readings assure that we have made a bottom? They certainly do not, particularly in this extraordinary environment. The market will trade off of news events until things stabilize to the point where there is some ability to predict where the economy and the "war effort" are headed. What the indicators do predict is that the pendulum has swung to an extreme position and that a sharp rally is possible at any moment. By the looks of the futures market this morning it appears that the moment is at hand. After a sharp rally the market will probably pull back toward the lows for another test. The underlying problem right now is uncertainty about military operations and economic recession. Add to that, a lingering fear of more potential terrorist acts. I cannot think of a worse mix of issues to throw at financial markets. It is amazing to me that things have held together so well.

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