Market Analysis
Interesting math: 5132 was the intraday zenith of NASDy in 3/2000.
If we break our new low of 1387, the next TA support level is 1357.
A 75% decline from the NASDy zenith would be 1283. This has some mathematical importance because exponential growth charts defining unsustainable (near vertical) growth of ANY thing typically collapse and on average decline approximately 75%.
bigcharts.marketwatch.com
This chart indicates, one remaining growth rate exists that we may be correcting to.
If we follow the rate of growth defined by the bottoms of "1982 through 1990" (draw a straight line across the bottoms of that timespan), this yields a potential bottom close to, but above, 800.
That may sound unduly harsh, and a collapse below 800 would likely plunge the technology market out of existence altogether. Were that to occur, NASDAQ would cease to exist and any surviving companies would have to be assimilated by the NYSE.
I find that 'below 800' scenario preposterous, and could only predict that if the globe plunges into depression in the wake of something cataclysmic. (Okay you prophets of doom & revelations, don't toy with me here or I'll send my rabid penguins of prosperity to gnaw on your ankles).
Technology is not dead; it's merely corrected to more reasonable valuations consistent with time-worn ideals like profitability and sustainable growth projections, instead of pie-in-the-sky estimates of hallucinating analysts and creatively-crooked accounting methods.
From a TA perspective, a break of 1357 finds the next strong support level at 1194. From a mathematical perspective, the lowest point I had ever found a case for yielded a target of 955.
Clearly, the most reliable of the methods is simply the straight line draws available from this chart:
stockcharts.com[w,a]mallyymy[p][vc60]
1. Draw one line across the two bottom points in 1982 and 1990. This yields the 800 I referred to.
2. Draw the next line across the peaks that occur in 1983, in 1987 and in 1993. Didja note that the line intersects perfectly the 1387 bottom we hit last Friday?
This grants us one more option: either we have just reached the end of the bubble and a break of 1387 will take us to 800+ very soon, orrrrrrrrrrr.....
1387 is support and we will continue to trade ABOVE that second line.
IMO, these are the only two chartable conclusions.
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I am not adept enough to reach conclusions on target numbers based on puts/calls... they typically define only direction, not destination points. I'd be curious if anyone else would be willing to add in the current direction those futures are pointing right now and whether they point to a particular month...
Nearly two years ago, I made note of a common corrective cycle that seems to take place in a healthy bull market, at approximately 9 month intervals. It is that pattern that caused me to conclude in an analysis posted in August 2000, that we'd hit a bottom in January 2001 and another in October 2001, before the final bottom occurs.
Of course, the impact of the recent terror attacks was not calculatable at all. I'll add that into this assessment:
World economies have been tenuous for longer than NASDAQ has been. Despite our detractors, we are the only global superpower (measured by military might PLUS economy) and our economy has been the foundation upon which the health of world economies depend.
The world is holding its breath right now, wondering how the Middle East/USA tension will play out. It's not so hard to predict. If the forces opposed to modernism and eager to return to the Dark Ages prove successful in igniting a major upheaval, they'll get their wish. They may all have to resort to living in caves if their infrastructures are levelled.
Note: this is not an expression of my hopes, beliefs or desires. This is an objective assessment of the practical realities of US military might weighed against the fact that the rest of the world desires an end to such ruthless terrorism for the sake of their national security and economic integrity.
It could get ugly, folks, but even Russia, China and Israel are sufficiently fed up with terrorists that they'll not block such an extreme outcome, though some will condemn us purely to play to their crowds.
Do I think this will happen? No. I think the worried pronouncements of condolences and qualified support from such notables as Ghaddafi and Hussein tell the story. They are well aware who will lose if it goes toe-to-toe and they know the line has been crossed. Furthermore, I think everyone will be surprised at the effectiveness of our hunting and trapping of murderers, and how swift it takes place.
How far we go depends entirely on how far these or other terrorists plan to go. Another attack of this magnitude or the demonstrated use of biological/chemical/nuclear weaponry will make a tactical nuclear response an option.
But let's worry about that after the murderers make their moves. I suspect they will not take that risk. And as it relates to this analysis, there's no way at all to predict markets if such extreme events occur.
In the meantime, though Greenspan has primed the pump to a remarkable degree, more than a few stocks have fallen well into oversold territory - even using old value models - yet a serious rally has not ensued. More priming is expected Tuesday.
It's the war holding the reins on this horse.
My 9-month model indicated a bottom was likely to occur between 9/21 and 10/19. As the last quarter played out and I saw quality stocks with good projections fall to levels that made little sense, I recognized a level of anticipatory trading that was taking place and narrowed that window a little more, to 9/27 - 10/2.
Since we hit a bottom 9/21 that may be it (based on my two line scenarios described above), I can only add this caution: the week ahead is fraught with highest risk.
True stalwarts like JNPR and RSAS do not begin reporting till 10/11.
Here's what to look for:
Nasdy has a moving average barrier around 1520. The next major resistance is at 1625, which likely won't budge on the first test. Ouite likely we won't break the first barrier before FOMC meets and traditionally, we get a late Tu/Wed selloff. By Thurs or Friday, JNPR and RSAS should start an uphill run leading into earnings.
On the other hand, if our destiny is that 800+ level, this week could be a stunning slide down.
News from Afghanistan (and rumors are out that our Special Forces have already had a few skirmishes) may hold the key.
So remember the numbers: 1520 and 1625 to the upside. 1387 as the most critical. 1357, 1194 as temporary support points. 800+ as the most likely destination once 1387 falls.
More importantly, prayers and well wishes to the men in our Special Forces this week, because their risks are greater, their targets and aims more critical, and this market and much much more rests on their shoulders.
I have the utmost faith in them. May they deliver us, and all the world, from evil... |
