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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: stockman_scott who wrote (38945)	7/13/2001 10:34:47 AM
From: Jill	Read Replies (2) \| Respond to of 65232

From Teresa's commentary: In our pre-0pen commentary for Wednesday, July 11 we said that in order for a successful test of bottom, we would need to see the NASDAQ 100 index trade above Tuesday's high of 1719 on thrust to prove that the low was rejected. At the time, I said something to the effect of "how we'll get there, I don't know, but stranger things have happened. Traders need to prepare for all scenarios." Right after the market closed, a miracle in the form of Microsoft appeared out of the blue. It was another case of the old Arthur C. Clarke quote: "Not only is the universe stranger than you imagine, it's stranger than you can imagine." What is a trader to do at this juncture? In terms of corporate fundamentals, the bottom line for Microsoft does not change the outlook for most of the other popular NASDAQ stocks whatsoever. The only thing that has changed at this point is something entirely psychological. Going into the close on Wednesday, many traders and the financial media seemed dejected due to another round of lowered earnings guidance, pushing any hope of recovery into next year. Traders and investors have been repeated been disappointed as to the timing of the turnaround, and these pre-announcements over the course of the last week caused a collective evaporation of the last vestiges of hope. This kind of sentiment is tantamount to a "give up" phase. The news from Microsoft acted like a pair of defibrillator paddles on a cardiac arrhythmia case. For now, the flat-lined patient has been revived in the ER but what happens going forward is far from certain. I believe many traders will attempt to fade this move up, but the question is whether they will become trapped. It's been a long, long downtrend, and the set up here was a test of low on both the daily and weekly charts. Given the success of shorting over the past year, many players will believe that this is some sort of "sharp short-covering rally" and use it to initiate additional short positions. However, the danger here is that this bottom might be for real, and if the NDX survives the first scary pullback after this pop here, it could set up quite the flurry of short-covering, the likes of which we have not seen in a long, long time. ottographs.com Looking at the daily chart, we can project some targets. Typically, on this 2"B" test of low, we would consider the 20-day EMA overhead the first target, and it was reached today. We know that many traders will have drawn a "downtrend" line here, highlighted in green. This projects a target right at the 50-day moving average in the 1828 area. The third target to the upside is the top of the pattern, just under the January 2001 low of 2100.