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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Logain Ablar who wrote (37390)	6/21/2002 3:44:54 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 69884

Anyone have a handle on the fundamental of FMKT??

To: Logain Ablar who wrote (37390)	6/27/2002 2:43:40 PM
From: Johnny Canuck	Respond to of 69884

Few Market Players Are Left to Surrender By Tony Dwyer 06/27/2002 10:53 AM EDT These are the times when market history books are in the development stage. Unfortunately because of the flu, I was out of the office Wednesday, but I was able to watch financial news all day. What a scene it was. Related Stories A Drop in Confidence Doesn't Mean a Double Dip Forget About the Bottom, Focus on Making Money Spotting Trends in the Bottoming Process The morning was filled with replays of how bad the day was going to be for stocks because of the WorldCom (WCOME:Nasdaq - news - commentary - research - analysis) revelations. A reporter chased Jack Grubman down the street, and the word "capitulation" was spoken in just about every other sentence. All I could think about was how different the current environment is relative to any time in my career -- especially different than 2 1/2 years ago. Only a few years ago, technology and telecommunications were the best-performing sectors. Financial networks were begging Bernie Ebbers for an interview, and 20% stock market returns were considered disappointing. That isn't the scene now. Every time I heard the word "capitulation" Wednesday, I cringed. Not because we haven't seen it, but because it is one of those Wall Street words. The Individuals According to Webster's, capitulation is defined as (a) the act of surrendering or of yielding (as to a dominant influence), and (b) the terms of surrender. If there was ever going to be a day for capitulation, Wednesday had the makings of it. Even President Bush talked about corporate governance at the G8 conference. So why didn't we get the "surrender day" (I refuse to use the C-word again), and when might we get it? We didn't get the surrender day because there really isn't anyone left to surrender. As any brokerage firm will be unhappy to convey to you, the individual investor has long been out of the trading business. Just about everyone who's still long stocks is so deep in the hole that the last thing on their minds is selling what they still have. I spent Sunday with my family at a New Jersey country club talking to people who were very disgusted about the prospects for stocks, but who refused to sell what they had left -- even if they have to hold them for 20 years. Anyone who needed the money they had in stocks has long since sold. What a contrast to 1999-2000, when all I heard was how they were going to spend the money they were going to make in stocks. The Pros So if individual investors aren't around to surrender, how about professional investors? It's interesting that there isn't much talk anymore of Janus selling its positions and leading the market lower. It's probably already done so. The negative influences that have plagued the market for the past few years haven't changed and don't appear to be changing. A resolution to the many geopolitical risks remains indefinable, and the fundamentals haven't improved enough to give any feeling that the market as a whole is undervalued. As a result, professional investors have had plenty of time to sell and would have already done so. On the surface, that may seem like a positive. But while a total surrender day may not happen, you need interested buyers in order to have any sustainable upside. Right now, that simply isn't the case. The fact is that the market has lost a generation of individual investors due to the huge losses, corporate governance issues and distrust of Wall Street brokerage houses. Only time can heal those wounds, and not enough time has gone by -- period. Individuals need to see gains because gains feed on themselves. What attracts most people to the stock market? When they hear how much money their neighbors are making and think, "Why not me?" The case in point is the increasing number of people asking me what they should short. That doesn't happen because the market is overvalued; it happens because it's the only thing working. It kind of reminds me of the guy who never really bought a stock before, but when he heard about how much others were making, bought Broadcom (BRCM:Nasdaq - news - commentary - research - analysis) at $250. What's Ahead Any further downside is likely to be grinding instead of climactic. The headlines are negative, the stock market losses are nearly unprecedented, and people don't open their brokerage statements anymore. Normally, that would make me scream from a mountaintop for people to buy. For some reason, that hasn't been my call. I see the market in the long-term bottoming process in a postbubble environment, which means only time can bring individuals back into the market with any level of comfort. That's the key because the individual investor drives the money flows for the professionals. Pros feel a lot more comfortable buying stocks they like when they know that new money will be flowing into their mutual funds. The topping process took a long time, and the market went to extremes that no one expected. Wall Street and individual investors ignored the many signposts along the way because so much money was being made. Ultimately, that led to the mother of all tops. We are in the opposite position now. We can see the signposts developing -- Grubman being chased down the street, WorldCom fraud, the Martha Stewart investigation, CEOs being labeled as cheats, and many others. That type of stuff will be looked back on as the mother of all bottoms -- but the mistake is trying to predict where that will be. Just as the top led to levels no one expected, the same is true of the bottom. As I said in my last column, I wouldn't be surprised to see the market spike higher, given the psychological backdrop. But those who lack the flexibility to change positions quickly should wait out this bottoming process and see the momentum change, instead of predicting when it will change.