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Strategies & Market Trends : Classic TA Workplace

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To: Shack who started this subject	6/26/2002 10:36:24 PM
From: skinowski	Read Replies (2) of 209892

Bearish bears... On The Brink (6/25/02) Forget about the market being oversold; forget about the idea that investors are so gloomy that the market must go up; forget about the market being close to its September lows. In bull markets strong overboughts are a sign of strength and in bear markets strong oversolds are a sign of weakness. Furthermore investors are not that gloomy. At least they are far less gloomy than they generally are at major bottoms. How gloomy is a market that is selling at over 40 times trailing earnings? How gloomy is the market when Wall Street strategists are recommending record allocations to equities? How gloomy is the market when equity mutual fund cash is only 5.3% of assets compared to a range of 10 to 12 % at previous troughs? As for the September lows, remember that in big bull markets major levels of resistance are exceeded, while in major bear markets support levels are decisively broken. A confluence of negative factors are converging to knock this market down at a time when investors are already jittery about the strong possibility of a third straight down year that is seriously eating into their hard-earned retirement funds. The market is suffering the effects of a still deflating bubble and its consequences. The severe imbalances built up during the bubble phase from the late 1990s through early 2000 have still not been corrected and are creating strong headwinds against any attempted recovery. The market remains highly overvalued at a time when the fragile economic recovery appears to be faltering. Earnings estimates are still coming down, driving corporations to cut all costs including labor and capital expenditures. The weakening of the dollar is creating a number of self-feeding negative effects including withdrawal of foreign funds from the U.S. market. The Argentina crisis has spread to Brazil, and is threatening the rest of Latin America. At the same time investors have lost confidence in the integrity of corporate earnings and company management while USA Today reports that only one-third of all Americans now think that we are winning the war on terrorism, compared to 66% in January. The one thing we have not yet seen in this two-year old bear market is a dramatic selling climax, and we may be very close to one now. comstockfunds.com

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