Still a Buy . . .

Buy.  Despite Friday's drop through to new lows, we have received additional confirmation that our buy signals are indeed intact.  In light of imminent military action, we put narrow stop losses just below the closest support ranges on all of our buy calls for last Thursday.  While many of those supports were broken by 1-2%, the action of the market rebounding from those lows, combined with further positive technical evidence, leads us to recommend staying in the market (or getting back into the areas of which we were stopped out).

At this point, we believe that we are very near a bottom and potential upside substantially outweighs the downside risks.  As such, we will not here put new explicit stop-losses on these buys (though our standard implicit stop-losses of 15% should still be maintained).

Wednesday, September 19, 2001:

Time to Rise . . .

Buy with stop loss.  More than one month since our last market commentary (Possible Stop-Loss Situation - 8/17/01) got us out of our remaining positions, and there really has not been much to say about the market.  It's been pretty much straight down since then, with the NASDAQ dropping over 400 points and 22% from then to today's low and individual sectors losing from nearly 15% (biotechs) to more than 30% (semiconductors) in that time.  All sectors have broken through to new 52-week lows, and most are at the lowest levels in three years.

On Tuesday, our proprietary strength factor reached over 300 on the bullish side (the strongest bullish signal we’ve seen in years).  The ratio of bullish to bearish signals is over 7:1 and all other criteria for a buy have been reached.  Additionally, we have individual industry confirmation, with bullish signals on nearly every stock we cover in each of our 6 sectors.  This is the industry confirmation that was conspicuously missing from our last buy call of early August, without which the market could not sustain a rally.

We are looking at a likely up move of at least 5-7% or so in the NASDAQ before it runs into resistance in the low 1600s, though there is a good chance prices may break through that first resistance point and continue upwards for a much more substantial gain.  The potential gain in most of the industry sectors is significantly higher.  We do see it as likely that Wednesday’s lows will be retested, and should prices break through those lows by more than 3%, more downside is probable and positions should be liquidated.  However, at this point, the potential upside in the market far exceeds downside risks, and we would recommend making purchases immediately.

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