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Strategies & Market Trends : Zeev's Turnips - No Politics -- Ignore unavailable to you. Want to Upgrade?

To: LTK007 who wrote (96375)	7/20/2002 7:55:47 AM
From: Softechie	Read Replies (1) \| Respond to of 99280

Barron's: Uh-Oh! The good news: There's support for the market; The bad: It's at Dow 7400 By MICHAEL KAHN While investors pine for the good old days of the bull market, the bears have been happily feeding on this misguided hope. Simply put, we're in a bear market, and stocks go down in a bear market. Which brings us to the issue of where technical indicators say the battered market is heading now. Unfortunately, the answer is still lower -- at least for the market as represented by the Dow Industrials. We can speculate about whether the fear of a double-dip recession or of terrorism is behind this. We can also speculate about when the market's slide will halt. I don't know when that will happen, but I'm confident it will when people stop asking the question. For the Dow, the last of the major stock-market benchmarks to make a major retreat from its bubble highs, the technical trend is still down, with short-term rallies providing more excitement than substance. The September 2001 low of 8062, an intraday number that came after the terrorist attacks in the U.S., shouldn't be the focus of our attention, as the market's plunge below that Friday showed. More often than not, emotional selloffs like that don't reflect true market bottoms. The level at which investors, as opposed to traders, will presume there's value in the market is near 7400 -- more than 600 points below the 8019 at which the Dow closed last week. A caveat: Support levels, of course, are not inviolable. The S&P 500 already has hit one similar to the Dow's 7400. In its case, it was around 900. But because the plunge to this level was so deep, a violation of support occurred. It closed Friday at 848. The Nasdaq Composite, of course, has been the hardest hit. But because it has been at its current low levels -- 1319-2200 -- for well over a year, it has been able to stabilize somewhat. True, an 880-point range hardly sounds like stability, but the pace at which it has set its major lows has eased substantially, to form the start of a base. Bases build over months or years, so this isn't a bullish call, at least not for this year. Within the Dow, there are some stocks that look good on a relative basis. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- One is International Paper, which has not only held its ground well above its September low but has been outpacing the Dow since late 2000 when the market began to favor value over growth. And, even with its July swoon, 3M also has maintained strength since last year and been outstripping the Dow since late 2000. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- On the negative side, it's no surprise that SBC Communications has been underperforming the Dow for years. It's tempting to look at it as being cheap, but it's foolish to buy a stock whose technical pictures indicates that it's still declining. The same holds true for pharmaceutical maker Merck, which has been one of the weakest stocks in the Dow. Again, it looks inexpensive, but why buy weak stocks when there are much stronger ones from which to choose? Of course, an even better strategy is to avoid buying anything until the overall market stops falling. -------------------------------------------------------------------------------- Michael Kahn writes the Getting Technical column for Barron's Online. His free newsletter, Quick Takes, is available at michaelkahn.tripod.com