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Strategies & Market Trends : Guidance and Visibility -- Ignore unavailable to you. Want to Upgrade?

To: SusieQ1065 who wrote (62119)	7/24/2002 7:11:55 PM
From: SusieQ1065	Read Replies (3) \| Respond to of 208838

Jim Brown 7/24/02, 17:10:57 Pivot Trade Wrap Instant Replay - The short covering today was an instant replay of the rallies on 6/24, 7/5, 7/15 and 7/22. The only difference is the magnitude. Round numbers for the four days mentioned the markets saw bounces of +300, +350, +400, +350 points. These were all short covering from oversold conditions. All eventually failed and we have traded much lower since. The monster +650 point bounce off the morning dip was due to the magnitude of the oversold conditions leading into today. The VIX was over 50 and the Dow had lost -1700 points over the last 12 days. The conditions were ripe for an explosion and while the +488 point gain was spectacular it represents less than 1/3 of the losses from the prior two weeks. The challenge now is finding a catalyst to keep it going. Once the shorts are covered and traders begin taking profits from the bounce the true market direction will then appear. Did anything happen on Wednesday to change the economic outlook? Don't think so. Did anything happen to change the accounting scandals to come? Not to my knowledge. One day does not make a rally and looking at many charts tonight show the rebound took stocks right back to prior resistance. Now the work begins. We need for the rally to follow through tomorrow morning and we need the flurry of economic reports tomorrow to be market positive. Multiple earnings were announced after the close but the most relative to me was EDS, which warned of lower income due to a lack of new customers and reduced spending by current users. They also said WCOM would impact earnings substantially. I expect the WCOM news to be repeated numerous times over the next few weeks as companies assess their exposure to the bankruptcy. AOL reported earnings after the bell that beat the street and affirmed guidance at the high end of estimates. However, AOL said they only added half of the one million new subscribers analysts had expected. Also the SEC announced they were starting a probe into their accounting practices. AOL was trading down after the bell. GE also announced a layoff of 2500 workers. The Dow closed right at resistance, which continues to 8275. The OEX stopped right at resistance at 420 with strong resistance to 431. The Nasdaq has strong resistance at 1300-1310. The SPX has strong resistance between 845-854 and it closed at 844. (Salomon Smith Barney lowered their year-end targets for the S&P to 1,000 and the Dow to 9,650. This is not going to be the last set of revisions.) The point I am making is that the market still has a lot of potholes in its future and stopping just below strong resistance sets it up for failure at the open. Nobody can tell you tonight what will happen at the open. The overseas markets will rally tonight based on the Dow/Nasdaq gains and the temptation will be to follow them tomorrow. Whatever happens at the open the shorts have not retired from trading. They will wait patiently and when the weakness appears they will come off the sidelines in droves. This will be the true test. Today was better than I speculated last night and a great day for longs. However, it was just one day. Tomorrow begins with a fresh sunrise and bulls will have to justify buying stock after a +500 point gain. Can you? Did I mention the TRIN was very bearish at .33 and the VIX has cooled to 45?