Glen, I'm already 50% in cash. Have stop loss in place. It will get ugly.
Tuesday March 23, 1999 (5:14 pm ET)
Never Mind 10,000 -- Let's Hope the Dow Stops at 9,000
By Mark Arbeter, S&P Chief Technical Analyst
NEW YORK, Mar. 23 (Standard & Poor's) - The failure of the recent breakout by the S&P 500 and the DJIA paints an ominous picture. The major indexes are tracing out broadening top formations, the exact formations we saw last summer, and the potential is for major weakness ahead. You can forget about DJIA 10,000 and hope the market stops at 9,000.
The potential for a 20% decline is very real and if you haven't moved to the sidelines, do so now. The NASDAQ is much more vulnerable and could easily plunge 25% to 40% from its recent high. Looking at the total stock universe, we would estimate that 70% to 80% of stocks are already down 20% or in bear markets. The Russell 2000, which topped out in April 1998, broke down again and appears headed for a test of its October 1998 lows.
Market internals were very weak Tuesday and with the NYSE
advance/decline line posting over 1700 net decliners, the A/D line will break below its October 8th level when the DJIA was at 7400 and the S&P 500 was at 960. NYSE new 52-week lows have shot up to over 4% of issues traded, swamping new highs. This level of new lows is very dangerous and has usually led to further downside.
The bond market, which most expect will rally sooner or later, is just not cooperating. The 30 year treasury is in an intermediate term downtrend and continues to ignore good news, not something that bodes well for the short term. If yields break to new highs for this move (above 5.75%) then stocks could get slaughtered.
Sentiment is still far too bullish and this hysteria over stocks must be broken before another bull leg can begin. When bartenders tell you what the market is going to do, head for the hills.
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