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

To: Johnny Canuck who wrote (37467)	6/28/2002 3:29:03 AM
From: Johnny Canuck	Read Replies (3) \| Respond to of 68173

Oversold and Far From Over By Ron Taylor 6/27/2002 2:54 PM ET Well, the market is trying to rally after getting spooked this morning on rumors of accounting impropriety at General Motors (GM: sentiment, chart, options) . Apparently half of Wall Street has come to their defense with GM also coming out in self defense earlier this morning. The market has been rallying after brokerage firms stabilized the situation, and the current drift higher is probably the result of quarter end re-balancing by mutual and hedge funds. (The cynic in me would have phrased that "quarter end market propping"). This market remains dramatically oversold and the short-term direction appears to be primarily based on news. If more accounting scandals and bankruptcies are announced, this market can remain oversold and is in danger of plunging sharply. The nature of declining markets and margin calls increases the potential for an oversold sell-off. One of the major things catching my eye today is gold and gold stocks, which haven't been strong despite numerous days of severe dollar weakness. In fact, while the stock market has rallied this afternoon, the dollar has dipped lower versus the euro and the pound. As I was saying, gold and mining stocks have been weak despite the recent dollar declines. I'm befuddled by this situation. Could gold's weakness be attributed to the conspiracy rumors popularized on the various gold-related websites? I'm not sure, but there's no disputing the fact that gold has been weak despite some crushing blows to the U.S. dollar over the last week and a half. The market seems to be completely shrugging off the WorldCom (WCOM: sentiment, chart, options) news. Thirty billion dollars worth of debt up in smoke, tacked on to the trillions lost by investors since the market peak, but hey … who's counting? Individual and institutional investors alike just keep coming back for more. That is the problem with the outlandish gains that investors grew to expect based on the bull market of the late 1990s. It turns out that speculation and the magical powers of compounding have become a hard habit to break. Investors anxiously tuning into CNBC to see if the "journalists" will officially declare it the capitulation day will not mark the ultimate market bottom. I suspect the ultimate bottom will be marked by investors, traders, and speculators alike swearing off any type of risk what so ever. In other words, there will be no interest in the stock market. People will react the same way they did in the 1930s by vowing never to invest in the stock market again. That will be the type of sentiment needed for this market to put in its ultimate bottom. How many years or how big of a decline is necessary to bring about this internal reaction is unknown. I hope that I'll be able to take advantage of (and have the clarity to recognize) opportunity when it comes again. Right now, it's not even close.