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Strategies & Market Trends : Classic TA Workplace -- Ignore unavailable to you. Want to Upgrade?

To: JRI who wrote (6772)	7/11/2001 5:33:39 AM
From: Perspective	Read Replies (3) \| Respond to of 209892

Hello all. Sorry I haven't been posting lately. I headed off to Indonesia to surf for three weeks, and my departure was a couple days earlier than expected. Hence, I didn't get to say "adios". I see that devilish things are afoot, and I see too that some are leaning bullish here, thanks to the developing bearish sentiment and oversold condition. May I remind you to take a step out to the very wide timeframes occasionally. I think AA and I both agree that this bear is not over. There is only a single bear market bottom requirement of mine that has been fulfilled, and it shouldn't even be included because it was corrupted by the prior acitivity. That is, the only bear market completion arguments I'll buy are the length & depth of the decline. A 2/3 drop in any index is historically significant. However, the 200% NDX runup the previous 18 months was unprecedented, and other averages have yet to even begin unwinding their bubbles. As for sentiment extremes, long-term measures have never approached the levels of bearishness associated with lasting bottoms. Everyone has been, and continues to be, chomping at the bit to buy every last bottom. The fear of missing the boat outweighs the fear of loss of capital. Fear of loss will make itself obvious before this is done. We will have panic before this is done. Economic opinion remains optimistic. Second half recovery? From where? Faith in the Fed remains supreme. Why in the hell would we have somehow magically repealed the business cycle? Because Greenboink is exceptionally clever? Because our high-tech toys have eliminated inventory corrections? Haven't we already disproved these? Insider selling continues to grow ever higher. This is one of my absolute favorite indicators. These guys are the ultimate market timers, and they're always just a little early. They haven't shown even the first buying twitches. On the contrary, sales/purchases surged to new highs at the end of last quarter. Valuations remain absurd, even using the peak earnings from the now-ended cycle. However, what is more likely is that the peak earnings from the last cycle are an aberration that may never be repeated, at least not for several years. Technically speaking, this is what a resumption of the bear should look like. Bear market rally is complete. Enormous breakdowns are underway at present. The most significant one that comes to mind involves one of the leading groups - SOX - and one of the leaders within that group: AMAT. It had established support at $50 going back to mid-April, defying all logic even as its fundamentals were collapsing. We see this often, especially when the situation is obvious and heavily played. Eventually the funnymentals usually win, so it is extremely signficant when they suddenly begin to matter again. AMAT gave up its support at $50 in mid-June, then tested it from beneath. It has since failed miserably. The stock had fought resistance at a six-year-old trendline, and failed. Next support, horizontally and TL, exists all the way down at new 52-week lows in the upper 20s. A bounce will likely occur here, but lets keep things in perspective: when Sickso finally began to fall apart on heavy volume, it bounced for about twenty trading days after the initial break. However, if you had covered in late December in the upper 30s, your best short re-entry was the low 40s on a few days in January. Then the stock collapsed from 42 to 14 over 50 trading days, with only the token up day roughly one out of every five. In trying to grab 10-20%, you might have missed another 50% move. KLAC & NVLS are in similar shape. Former SOX reps like LLTC and MXIM are performing dismally. XLNX has taken out important support at $40. Look at the breakdowns occurring in BEAS. Look at GE. And my liquidity indicator, BTK, is flashing red. The bear will resume sometime soon. Ask yourself what it would look like if the bear were resuming. It would look exactly like what we are seeing. Stocks would again become oversold, first on lower volume as buyers strike, and then on higher volume as the old lows are tested and then fail. You might get a little summer rally to yield better prices, but that amounts to dancing on the railroad tracks again. Remember how long things remained overbought in 2000? Remember how lopsided sentiment became - and remained? When the pendulum has swung the other way, and the bear boat truly becomes uncomfortably crowded, then I'll hop ship over to the bull camp. I'm continuing to view this as a repeat of 1931 for the Naz, and it continues to work. Of note, if the similarities were to continue, this is just about the time that the true recognition wave hit. It would be marked by the second-half-rebound consensus finally giving in. Capitulation? Well, we'll have to see where recognition gets us first... BC