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To: Jim Willie CB who wrote (1961)	7/12/2002 10:29:49 AM
From: stockman_scott	Read Replies (1) \| Respond to of 89467

Nasdaq could fall 20% more Sean Silcoff National Post Friday, July 12, 2002 MONTREAL - The bad news for North American investors could get a lot worse, with major stock indexes such as the Dow Jones Industrial Average falling as much as 37% before bottoming out, technical markets analysts said yesterday. Merrill Lynch's technical analysis group said in a report yesterday the S&P 500 and Nasdaq composite index could fall a further 10% to 20%, despite the fact both markets have been more oversold this week than at anytime over the past 20 years. The London-based research team also said the Dow Jones industrial average could go into freefall if it breaks below the 7914 mark. "This will be the key longer-term support foundation to defend" into the third quarter, the report says. If the index can't find support at that level, it could fall to as low as 5,543 -- 37% drop from yesterday's 8801.53 close. Roman Franko, a technical analyst with Dundee Securities in Toronto, agrees. "All the major indices are falling through key support levels, and they're all doing it at the same time," he said. Mr. Franko said buyers flocked into the S&P at the 950 level last September and also in the fall of 1998, marking the index's low point. Now that the index has fallen to that level for a third time, "we seem to be striking out and falling through very important support. Mr. Franko forecasts the S&P could initially fall to the mid- to high-800 level (compared to yesterday's 927.37 close), at which point it will likely rally back to the 950 "neckline." Below this level, anyone who bought shares over the past four years is in the red. As the index moves to 950, "people will say, 'maybe I should take some money off the table.' " This will create a situation where sellers flood the market. Buyers could eventually get discouraged and back off, with "sellers chasing the bids lower. That's the really scary part." Scary because, by Mr. Franko's analysis -- based on a forecasting technique called the "head and shoulders pattern" -- the S&P could hit bottom at 600, or 35% off Wednesday's close. Mr. Franko is forecasting the Nasdaq could fall below 1,000 (down 27% from yesterday's close) while the S&P/TSX composite -- Canada's benchmark index -- and the Dow could drop by about 23% and 16%, respectively. However, Clément Gignac, chief economist and strategist with National Bank Financial, sees stocks rallying slightly in the second half of 2002, with the S&P finishing the year at 1050 thanks to stronger profits and productivity numbers, and other indicators the economy is poised to grow. "I think the fundamentals will prevail," he said. "We are closer to the end of the bear market than at the middle." © Copyright 2002 National Post nationalpost.com{4375C0F3-5EAA-41C6-B874-C1F63FDD1CA7}

To: Jim Willie CB who wrote (1961)	7/12/2002 11:01:19 AM
From: stockman_scott	Respond to of 89467

an excerpt from contraryinvestor.com <<...Although the correlation between money growth and equity market performance was not exactly tight during the 1980's, there is no question that the R-squared value in this relationship went up exponentially during the 1990's...until 2000 came along, that is. Approximately one half of all M3 in existence today was created since 1995. There is absolutely no doubt in our minds that growing money (and credit which begat much of this money growth in the first place) was an essential piece of the new era stock acceleration puzzle during the latter half of the last decade. The question we now pose is that, "has the turn in the credit cycle largely negated the positive influence of money growth on financial asset prices and the broader economy?" Despite over $1.6 trillion of additional M3 coming into our lives since 2000, is the corporate sector's feverish work to send bond and equity investor funds to "money heaven" (corporate bankruptcies) outweighing what would have ordinarily been the extremely positive impact of this type of M3 growth? As you know, the folks at Worldcom today speculated that an official filing may be the only avenue left to them. Message? Expect the filing any day. Credit cycle reconciliation is deepening. With Enron, Worldcom, Kmart, Adelphia, Global Crossing, etc. going down in relatively short order, just where are the credit derivative losses associated with these accidents? Just how much more M3 will be needed just to "keep us even"? Are Greenspan and the Fed racing to stay ahead of debt deflation? It sure appears as such. As the downside of this once in a generation credit cycle continues to play out, the American household now caught in the financial crossfire has a target painted on directly its collective head...>>

To: Jim Willie CB who wrote (1961)	7/12/2002 11:17:47 AM
From: stockman_scott	Respond to of 89467

Consumer Sentiment at 8-Month Low By Ross Finley Friday July 12, 10:31 am Eastern Time NEW YORK (Reuters) - U.S. consumer sentiment tumbled in early July as a stock market drubbing that took major indexes to multi-year lows roused Americans' fears for the future but failed to shake their assessment of the current situation. The University of Michigan's preliminary consumer sentiment index fell to its lowest level since November 2001 in July, down to 86.5 from 92.4 in June, market sources said on Friday. That bucked economists' forecasts for a rise to 92.8. Analysts watch sentiment for clues on whether consumer spending, which supports about two-thirds of the economy, will maintain its strength. "The drop overall has negative implications for consumer spending as it is being paired with indications for sluggish employment and income growth," said Paul Ferley, assistant chief economist at Bank of Montreal/Harris Bank. The data triggered a sell-off in stocks and a rally in U.S. Treasury securities, which are pricing in an increased likelihood that the Federal Reserve will wait for months, perhaps until next year, before lifting interest rates from four-decade lows. Yet so far, consumer spending has remained strong and a weak sentiment index does not always translate into a sharp pullback in shopping. Indeed, the report followed news from the Commerce Department earlier on Friday that retail sales across the nation rose 1.1 percent last month, reversing a similar drop in May. "The entire deterioration this month was in expectations, which suggests to me that it is fear rather than consumers actually having experienced a deterioration in the economic environment or in their own personal financial situation," said Jade Zelnik, chief economist at Greenwich Capital Markets in Greenwich, Connecticut. The preliminary current conditions index, which tracks consumers' views about their present financial situation, fell only slightly, to 99.0 in early July from 99.5 in June. The expectations index, meanwhile, which measures attitudes about the 12 months ahead, plunged to 78.5 in early July from 87.9 in June. That was also the lowest level for this subcomponent since November. "The survey is telling us a story of the stock market decline contributing to the souring of consumer attitudes about the future, with survey respondents acknowledging that the economic reality on the ground is still decent," said Anthony Karydakis, senior financial economist at Banc One Capital Markets in Chicago. The preliminary University of Michigan consumer sentiment survey is based on telephone interviews with roughly 250 Americans across the country on personal finances and business and buying conditions. The survey was conducted through the middle of this week, capturing some of the steep declines in stock market indexes that brought the Standard & Poor's 500 down to a 4-1/2-year low. The survey is rounded out with 500 calls by month's end.