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Strategies & Market Trends : P&S and STO Death Blow's -- Ignore unavailable to you. Want to Upgrade?

To: Justa Werkenstiff who wrote (11712)	10/20/2002 8:33:38 PM
From: LTK007	Read Replies (3) \| Respond to of 30712

Thresholdtraders commentary on last week(Blaine is the writer) I like it. << Last week the NYSE and OTC Bullish percents reversed back to buy signals..........this is technically a higher low on the bullish percent charts and coming from oversold levels. 3 weeks ago I suggested that the next BUY signal on these would be the one we needed to get long on.........unfortunately, if you look 'under the hood' of this bounce it raises a large RED FLAG. Let me take you on a tour so I can illustrate why this bounce does not look credible for a sustainable move up. These incredible BEAR bounces have been going on for nearly 2 years now and wanted to take the time to illustrate how they have looked AND more importantly the characteristics of the underlying stocks which have accounted for the VAST majority of the bounces. First........take a look at the April '01 bounce chart......note that the index chart clearly showed all the GAPS / exuberance. Gaps represent a price VOID where the opening prices are above the previous days closing prices. This VOID or gap can go unfilled, however, when there is fundamental uncertainty its very VERY unlikely that they go unfilled. Contrary to 99% the experts who predicted the Bear market was over in April '01 we strongly suggested that the April '01 bounce lows would be re-tested. I am NOT here to toot my horn, I am merely here to objectively illustrate my opinion as to what kind of a bounce is sustainable and what is NOT. OK, lets move onto the second point........take a look at the Sept. '01 bounce chart ....the bounce for the Index actually looked pretty clean, however, if one were to look 'under the hood' at the stocks that accounted for a significant portion of the indexes bounce you would have noticed that they were FULL of holes similar to the ones I have posted just below here. Now, lets take a look 'under the hood' of this most recent bounce in the indices and the stocks that accounted for the bounce. Look at these charts........GE, QLGC, LEH, IBM, MER, FNM, BAC.......I could go on and on and on here, but I think you get the point.....you can't build a sustainable base with only 1 leg on the chair and buying stocks like the above is like 'Feeding the monkey and watching him Shxx'....I apologize for the analogy and don't mean to be offensive by it...........when I was young and learning to play poker I used to play with my neighbor who was much older than me.......during our weekly games he would let me and the others win early in the evening, however, by the end of the night we would nearly always find ourselves down 20 or 30 dollars........one night he looked at us and said 'Feed the monkey watch him shxx'........it was so damned funny at the time we did not mind that we had given him so much money over the course of time as it opened our young eyes to the fact that he was reading everyone of us like a BOOK........bottom line, don't forget to look under the hood. In Summary...............CASH is not TRASH. Although this bounce has been strong, objectively it could collapse at anytime given the bases we are moving up from. Subjectively, given the AIRTIME and general sentiment of those who are given airtime we could bounce to COMPQ 1400, INDU 9000, SPX 950 before we roll over. Which ever event occurs (collapse or CHOPPY attempt at the levels mentioned and then pullback) we are likely to see a re-test of the recent respective lows of COMPQ 1000, INDU 7000, SPX 725. The plan simply is this.........trade L-I-G-H-T, don't overtrade and don't chase bear rallies......we are sitting on a one-legged stool which is likely to see another washout before year end. The PLAN would be this...........trade light, lets see how the above evolves with the likely washout before year end and given the seasonally stronger period of the year (November - May) maybe the market will give us an objective reason to take longs after the washout ?!>>