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To: Box-By-The-Riviera™ who wrote (114585)	7/26/2001 3:11:14 PM
From: ild	Respond to of 436258

Just Make Friends With This Downtrend By Bill Meehan Special to TheStreet.com 7/26/01 1:01 PM ET URL: thestreet.com Another yo-yo open and failure to follow through from Wednesday afternoon's rally are typical for this market madness. The major market measures' ability to again hold the July 11 lows was impressive, but hardly convincing. The trend is still down, the macro and microeconomic news remains dismal, and another rate cut by the Federal Reserve is unlikely to stimulate the demand necessary to generate much in the way of earnings growth. Hewlett-Packard's (HWP:NYSE) warning could hardly be considered a real shocker, given the state of the domestic and global economy. Already heavily indebted consumers probably won't spend sufficiently enough to generate the level of economic growth that will produce the earnings growth rate expected by analysts and economists next year. The Economic Outlook The June durable-goods orders report was lower than expected, down 2% vs. the consensus of a 1% decline. Durable-goods shipments fell by 2.3%, with transportation showing the biggest decline. Still, excluding transportation, durable-goods orders slipped 1.7%. The Dow Jones Transportation Average only managed a paltry gain Wednesday afternoon, especially considering its recent plunge. I take the weakness in that index as further support that the expected economic rebound won't come as quickly, or be as strong, as many on the Street believe. The second-quarter employment cost index was a tick better than expected, but still a high increase of 0.9%, with the increase in benefit costs slowing from the first quarter. Year over year, the ECI has risen 3.9%, with wage and salary costs up 3.7% and benefit costs up 4.5%. Profit margins are unlikely to rebound anytime soon due to slack demand, overcapacity, rising labor costs, declining productivity and, for many companies, the still-strong dollar. Where Are the Bears? While it's certainly possible that holding the July 11 lows marked a significant bottom, I don't see it that way. I'm troubled by the continued lack of bearishness in the Investor's Intelligence numbers, which showed bulls declining and bears increasing by less than 1 percentage point. It's very hard to believe that a meaningful bottom will be made without more fear. Heading into the noon hour Thursday, the major market measures were all in the red and just off their worst levels. Breadth deteriorated all morning, but could hardly be called heavily negative. The Chicago Board Options Exchange put/call ratio was at 0.67 vs. Wednesday's surprisingly large 0.81. The market remains in a well-defined downtrend, with the S&P 500, the Nasdaq Composite, the Nasdaq 100, the Russell 2000 and the S&P MidCap Index all trading below their 40-week simple moving averages. The trend is your friend, especially when the fundamental news is dismal and sentiment remains optimistic.