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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Logain Ablar who wrote (3351)	3/1/2001 9:55:23 PM
From: John Pitera	Read Replies (1) \| Respond to of 33421

Thanks Tim, he has a valid point about optimism -------won't go into much detail in this commentary about the various factors underlying this bearish call on the S&P, as my concerns have been well documented in this space in recent months. Suffice it to say that I feel there are major risks to this economy and major risks to corporate earnings that are not being sufficiently recognized by market participants and by market analysts. Need some anecdotal proof? How about the following headline from a recent issue of a national business publication: "Growth is Near Zero – And That's Good News." A catchier way of phrasing all this is that the risky fundamentals and the weak technicals say "no, no" but the shockingly bullish market sentiment is saying "yes, yes." And when the prevailing market sentiment is so far out of synch with the fundamental risks and the technical price action, this sentiment has a very strong tendency to be wrong (witness the surprisingly large contingent who were bearish throughout the 1990s). Or as Jerry Wang put it in the February 20 edition of our Monday Morning Outlook: "Even amateur contrarians know that there is only one way to read that (very optimistic) sentiment. If the market forms a long-term bottom with sentiment readings this optimistic, it will be the first time in history." The major technical driver for my bearish call is the fact that the S&P took out its lows of 2000 at 1254.46 before rallying yesterday. As Joe Sunderman pointed out in yesterday's edition of Schaeffer's Daily Bulletin, such a situation had not occurred in almost 20 years. And from my perspective, this underscores the fact that the behavior in the S&P in the coming months is likely to differ from its behavior over the long bull market. This is not to say that there aren't other examples of potentially major technical weakness in the S&P, including what can be interpreted as a massive "head and shoulders" top and the potential for a close this month for the first time in over a decade below its 40-month moving average.---------