Jeff, a couple of things.
1. Fundamentally, things aren't great, but there not as bad as the Depression which many on SI seem to think. We are not waiting in bread lines, or at gas stations for several hours like the 70's. Productivity without question will and is continuing to improve based on technology. Communication speeds are ever increasing and the demand for them will continue. We have witnessed 911, Enron debacle, numerous bankruptcies, dot com implosion, analysts interrogation as of late, and the Palestinian and Israeli War. This market has had virtually everything thrown at it and the bears have been in control for a very long time. I still believe we are and will be in a bear market for some time, but I believe we will retrace the run from March of 2000 to the carnage of last September. If I said 3000 this year, I should and meant to say that we would be well on our way by year end, and will hit 3000 next year in 2003 imho.
Fundamentally things stink, but companies are restructuring their debt at a lower cost to the organizations which will mean better balance sheets in the near term, hence higher equity prices and lower PE's. Pretty soon companies will start announcing share buy backs, because CEO's know this is what it takes to get their stocks moving, and they know their earnings will be better based on the debt restructuring alone. It's a simple fact, lower interest rates (which we have now) for debt ridden companies is a huge savings in the long run and will allow companies to spend more, hence increase in CAPEX spending (in this case updated equipment) due to an increase in cash. Don't be surprised to see WCOM do this soon after everyone capitulates on it, considering they now have a new CEO.
2. That brings us to TA, which I'm not the greatest at unlike many on this board and I admit to that, but I do know a little. In every bear market there's always bear market rallies, and these rallies normally retrace back up to levels of 23.6%,38.2%, or 50% which would mean 2270, 2817, and 3259 respectively. I believe the 50% retrace is possible to scare the bears into hybernation, then the real double dip recession will take place, and back down we go. I do not believe we'll get capitulation now, because everyone is sitting waiting and expecting it, INCLUDING da bears.
Take a look at the MACD and Stochastics using a 2-year time frame on the indices below and see what you come up with. Weekly charts are looking washed out, especially the $nwx and $xtc, and the $btk is holding support @ 410 and may be bouncing off it's 50dma. Telecom looks awfull, but that's when it's time to buy. I honestly cannot see telecom going much lower, maybe to the 460 level. Lots of charts are showing positive divergences. Trends are meant to be broken over time, and it normally takes time for this to occur. But usually when it's a safe time to buy is the wrong time.
I expect a decent run for a couple of weeks, then probably one more retest, and that will be the last time to buy in low. Good luck.
KM |
