Without Momentum, Market Will Keep
Eroding
By Helene Meisler
Special to TheStreet.com
06/21/2002 09:33 AM EDT
Are you depressed yet? Can you possibly believe the market can start each day quietly
or up and hang in there all day, only to collapse in the last hour? Isn't this the exact
opposite of what the market did in late 1999 and early 2000?
I can remember back then, each day the futures were flat to down on the open, and each
day the market would close higher. Oh, some days the futures would simply open
higher and keep going (sort of the same way they sometimes open lower and keep
going these days). And each day, the statistics wouldn't confirm the upside, yet the
market always did the same thing: explode to the upside in the last hour of trading. Let's
not forget how many months that went on for. The market can be persistent when it
wants to be.
The main difference between then and now (aside from the direction!) is the magnitude.
Back then, stocks would go up several dollars each day; we don't see a lot of that now.
Apple (AAPL:Nasdaq - news - commentary - research - analysis) was probably the
worst of the lot when it disappointed us the other day and tumbled three or four bucks,
but for the most part, this is death by fractions where stocks give up 80 or 90 cents a
day. But they do it each and every day until they're down several bucks in a week.
In the past 24 hours, I have had several bearish folks tell me they are now in buying
mode. They're beginning to think we are close to the end of this particular slide and
ready for a rally. And they want to know if I see anything out there that can confirm their
views.
Several of my indicators are so stretched right now that any big whack to the downside
would give way to a rally. But without a whack, with more of the same grinding action, all
I see is more erosion.
Let's begin with a big whack, should we be so lucky to get one. The Nasdaq is now only
a few bucks away from breaking its September low. The S&P 500 is not nearly as close,
but at least it isn't nearly as far away as it was after Monday's close. If we go back and
match the number of stocks making new lows from that Sept. 21 peak reading to now, it
is hard to believe we will surpass those readings. So that would be a positive
divergence.
While not as certain, it is now a possibility that such a whack would not take the
oscillators to new lows, either. That too would be another positive divergence.
I discussed sentiment Thursday, so I won't review it, but should such a whack get those
bulls down another several percentage points, even that might be in the right place.
Even the put/call ratio (on a 21-day moving average) is now back at the same levels we
saw in late September, so that too is at least in the right place if the other indicators find
their way to holding.
This market isn't about momentum; this market is about erosion. So if it gave us some
momentum to work with, then we could use it to our advantage. But we need some sort
of momentum (whack) in order to get out of the current malaise we're in. Without
momentum, we're just eroding. |
