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Wednesday, April 18, 2001: Greenspan
vs. The Economic Slowdown - Round 2 . . .
Follow-up sell. Once again, Greenspan's Fed has
held an impromptu meeting and lowered interest
rates by another 50 basis points, the fourth
move in as many months. Once again, markets
reacted immediately, rising anywhere from 3% in
the Dow to 8% in the NASDAQ to close to 15%
within the semiconductor sector and a few
internet sub-sectors. And once again, we expect
this move to be the end, not the start of an
upswing. The signals we are getting lead us to
believe that this situation will most closely
resemble the Fed-driven rally at the beginning
of January. The primary difference we are
getting is that this time, our bearish signals
are stronger. Most areas of the market have come
to within 3 to 5 percent of what had been
relatively strong support for much of this year.
These levels should serve as resistance going
forward. Additionally, our proprietary strength
index has reached well over 300 on the bearish
side (a value of more than 150 bullish/bearish
indicates a buy or sell on the market if our
other criteria are met). This is a level not
seen within the last several years. We have
sells or follow-up sells on all the technology
sectors we track, and we expect that markets
will begin turning back down shortly.
Tuesday, April 10, 2001: Selloff to
Resume . . . Sell. Back in February, after
the NASDAQ broke through the basing pattern it
had been setting up, we said that it was
reasonable to see it go as low as support levels
around 1900. On March 7, we reiterated that the
index should at least bounce off of or pause at
around that 1900 level before heading lower.
That is exactly what it did, later breaking
through that support level and setting up what
felt to some like a freefall of almost another
15%.
After all that, the events of this past week
have been very encouraging to many investors.
However, we do not believe that this market has
turned around. Last Tuesday (4/3), our
proprietary index hit 167 on the bullish side,
its first time over 150 since December 21 (a
value of more than 150 bullish/bearish indicates
a buy or sell on the market if our other
criteria are met). On Wednesday, this measure
rose above 220. However, in neither case were
all the other criteria for a buy met (though on
4/4 it came close), indicating short term market
strength, but a likelihood that most or all
gains would be given back. Moreover, in looking
at the pattern that has developed, it appears as
though the recent strength is merely a pullback
to the previous support levels broken a few
weeks ago. We expect those levels to act as
resistance as markets move back into that
territory. Besides the NASDAQ, sectors at or
nearing such resistance levels include biotechs,
computers, financials, internets, and
semiconductors.
As of Tuesday, April 10, our proprietary
strength factor has completely reversed itself
from a week ago and has reached 164 on the
bearish side. Additionally, the other 5 criteria
we need in order to make this sell valid have
also been met. Expect the market to sell off in
the near term.
· May
2001
· March
2001
· February
2001
· January
2001
· December
2000
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