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To: Sig who wrote (8299)	7/19/2002 3:52:03 PM
From: D.B. Cooper	Read Replies (1) \| Respond to of 13815

7995,7994'7991,7887

To: Sig who wrote (8299)	7/19/2002 6:02:22 PM
From: stockman_scott	Respond to of 13815

McMillan Market Commentary Thursday, July 18, 2002 optionstrategist.com <---accompanying charts Stock Market This market has quickly become the most ferocious of bear markets. Rallies during bear markets are always sharp, short-lived affairs. But they are becoming shorter and shorter. On July 5th, in a half day of trading, the market jumped 320 points. Last Monday afternoon, it rallied nearly 400 points in an hour and a half. But in both bases, the bear came out stronger than ever -- slamming the market to new lows. All potentially bullish setups have been undone. There had been a chance that the September lows might hold, and the bullish 'W' formation could occur. That is no longer a possibility as the market has smashed through on the downside. This means that a whole new bottoming process will have to eventually be constructed. Our four main technical indicators are price, market breadth, volatility, and put-call ratios. They have served well to keep one from buying into this market. The first three have warned that, while the market is oversold, it is not ready to be bought. Only the put-call ratios have issued (false) buy signals, but we have correctly cautioned against using only one of the indicators as a reason to buy. Let's review their status now. Price action has been terrible. Each potential support area has been violated and quickly becomes a resistance area. $OEX (Figure 1) now has resistance in the 470-480 area. One cannot even consider buying the market for more than a day trade until $OEX can break out above these levels. Market breadth has been poor, as well. About the only positive thing about market breadth readings is that they aren't as bad as they were last September. So, neither price nor market breadth has even come close to generating a buy signal. Market sentiment, however, hasn't been as clearly bearish, as option traders have tried (incorrectly) to jump in too early on the long side. Implied volatility continues to rise, and that, too, is bearish. As long as volatility trends higher, it is bad news for stock prices. The CBOE's Volatility index ($VIX) has moved sporadically higher, but hasn't really approached the levels of last year. In addition to watching $VIX, we also keep our eyes on a composite volatility index constructed by combining the implied volatilities of the individual stocks that make up the $OEX Index. This chart is shown in Figure 2. It is clearly moving strongly higher. It won't give a buy signal until it peaks and begins to fall. One facet of this chart is potentially more bullish than the $VIX Index: it has nearly reached the levels of last September. If it should exceed those levels, which seems likely, that would at least show that option traders have reached levels of panic greater than last September. Finally, there are the equity-only put-call ratios (Figures 3 and 4). These gave buy signals a couple of weeks ago, and those buy signals remain in force. Clearly, such buy signals have been premature and incorrect. That's why we require price confirmation of any signal received from a sentiment indicator -- because sentiment can sometimes be misleading. Perhaps these equity-only buy signals will yet prove to be correct -- just premature. In summary, the same advice that we've been espousing for several weeks continues to hold: while the market is deeply oversold (and thus subject to spawning sharp, short-lived rallies), there won't be any intermediate-term bullish signal until $OEX (and other major indices) can close above resistance. For $OEX, that would be a rise above the 470-480 level. At the current time, that seems like a formidable task. In fact, even when the buy signal eventually does occur, there will have to a retest. I say that because of the severity of the oversold condition at the current time. Thus, we won't be in any rush to pile in on the long side. Rather, we'll continue to tighten stops and take partial profits on shorts. One last comment. Today is expiration day. Expect arbitrage selling because there are a large number of in-the-money puts (in terms of open interest) and virtually no in-the-money calls.

To: Sig who wrote (8299)	7/19/2002 10:17:06 PM
From: stockman_scott	Respond to of 13815

Point of capitulation revealed! Survey: Investors prepared for market to fall much further By Kristen Gerencher, CBS.MarketWatch.com Last Update: 5:25 PM ET July 19, 2002 SAN FRANCISCO (CBS.MW) -- We all have it -- a number that represents the end of our harrowing descent -- and for CBS MarketWatch.com readers, it appears to be near 7,000 on the Dow. As the Dow Jones Industrial Average headed toward a 390-point drop by Friday's close, we invited readers to weigh in on where they forecast the Dow's bottom. Unfortunately, it's well below the blue chip index's 8,019 close. As of an hour after the close, the median level at which 13,000 respondents saw a bottom was in the 7,000 to 7,500 range, which drew 22 percent of the vote. Thirty-nine percent saw it above that level and 40 percent below. On a grimmer note, 30 percent expect the Dow to drop below 6,500 - at least another 19 percent lower -- before a turnaround occurs. "I see this as a change from complacency," said Gail Dudack, chief investment strategist at Sungard Institutional Brokerage Inc. in New York. "I don't think you would've gotten 30 percent saying the market could get to that level even a month ago." Contrarians may read the results as a sign the bear market is approaching its grand finale, said Jim Bianco, president of Bianco Research in Chicago. "Generally, the public is very optimistic, and this does not sound like the public is very optimistic at all," he said. "If you want to be bullish, this is what you want to hear out of a poll like that." At 29 percent, the next biggest reader consensus put the Dow's market bottom higher at 7,500 to 8,000. Ten percent saw it falling no lower than 8,000, and another 10 percent expect it to bottom-out between 6,500 and 7,000. The informal survey provides a snapshot of those inclined to think negative, but it failed to address questions such as how many readers consider this is a buying opportunity to balance the bias, said John Bollinger, president of Bollinger Capital Management in Manhattan Beach, Calif. The poll supplies an "important piece of information, but I don't think it's the whole story," he said. Of course, we are a product of the surrounding mood: The percentage of people who foresaw 6,500 or lower grew throughout the day -- from 22 percent around midday to as high as 32 percent as the Dow accelerated its fall. Borrowing from Fed Chairman Alan Greenspan, just call it "Infectious Gloom." ________________________________ Kristen Gerencher is a reporter for CBS.MarketWatch.com in San Francisco.