Table On-Topic Summary - 18-Oct-2002

A compilation of this board's financial/economic posts From 43789 to 43834

Post  43789  by  Decomposed       OT: Table ON TOPIC SUMMARY Oct 17, 2002

Post  43790  by  lkorrow       Reply

Ark, In the business world, the guy at the bottom may tell the CEO something and he says you don't understand the full picture. It's true. Would love to hear more, but understand busy; one more day, then have a good weekend!

Post  43791  by  Decomposed       Reply

But jeffbas... were they preceded by run-ups anything close to what occurred in the '90s? The initial run-up is everything, when it comes to determining how far a stock (or a market) can fall.

Post  43792  by  oldCADuser       OT: Clo, The law you are talking about is the Poss

Post  43793  by  pdowd       OT: Terror Warning From CIA Chief

Post  43794  by  pacemakernj       Reply

Linda, RE: China, I would not say that China's economy runs counter to ours. What is taking place is the mad rush by many manufacturer's to find the low cost labor market in the world. I don't know what the numbers are but I would bet (FDI) foreign direct investment in China by US, Europe and Japan is enormous. As I've said before the Chinese are more producers than consumers. I believe the Chinese are exporting deflation around the world. Which will imo have long term consequences on everyone but mostly the Japanese. IMO, that is where competitive pressures will be most felt in the short term. The Japanese cannot continue like they are. A devaluation of the Yen is now more possible than ever. China can only serve to exacerbate those pressures. You know I've been on this China issue for a while and I think the Chinese will pose very difficult challenges for some time to come. Pace.

Post  43795  by  uponroof       Reply

"Fed must cut to stop the rot, OECD warns" Well Jeffbas, here's another warning wrt the over valued dollar: "...In its annual healthcheck of the world's largest economy, the OECD slashed its growth projections and warned that the dollar could be as much as 40% overvalued..." uponroof- I maintain my position that the dollar's strength is much more important to certain financial institutions...nay....perhaps even entire countries! (Japan) than we are being led to believe. Devaluing without bankrupting half the planet.....thanks to Saint Rubin's 'strong dollar policy' is the spot they find themselves in. 'Recovery' (in large part manufacturing) can not start without a painful reckoning of the dollar. So we go sideways forevermore while non blinking hypsters make their case for some sort of 'right around the corner' miracle. http://www.guardian.co.uk/business/story/0,3604,814429,00.html ******** uponroof- Euro weaker, dollar stronger, yet gold is up. This has been happening off and on lately. Is gold shifting it's counter weight influence over to euro interests? Has golden respect left the dollar for the euro? Hard to tell much of anything in currencies and gold given the multiple intervention schemes that must be sorted through but perhaps keep an eye on this. More on gold and gold shares... Excerpt from an alert by Steve Saville. "...Yesterday (Thursday 17th Oct) the HUI once again spiked below its 200-DMA, only to once again rebound and close above it. Furthermore, the December gold futures contract dropped to within a few cents of its 200-DMA before rebounding. Note that on 10th October the HUI bottomed at 102 while December gold bottomed at around 317. On 17th October the HUI bottomed at 106 while December gold bottomed at 310. That is, a $7 drop in the gold price was accompanied by a higher low for the HUI. This is the scenario (the gold price making a lower low while gold stocks make higher lows) that we clumsily tried to describe in yesterday's Interim Update. It is a positive divergence..." Good Luck Cheers

Post  43796  by  uponroof       Reply

Consumers: the next bubble waiting to burst Friday Oct. 18 2002 "...The sharp increases in earnings at Citigroup Inc., BankAmerica Corp. and others, during the kind of economic downturn that usually hits financial institutions the hardest, were driven almost entirely by gains in consumer lending such as credit cards and home mortgages. Some economists worry that in their growing infatuation with debt, consumers are about to repeat the mistakes that got the corporate world into trouble during the bubble years. . As Stephen Roach, chief economist at Morgan Stanley, put it during a recent visit to London, "The U.S. consumer is the next bubble waiting to burst." . With easy access to finance, consumers have gone on a borrowing and spending binge in the United States, Britain and a few other countries. The spree has kept the global economy from falling into a deeper recession and has provided the foundations for the current tenuous recovery. . So far U.S. consumers have generally held up well, but a few signs of strain are already appearing. Though mortgage lending continues to flow, for example, the Mortgage Bankers Association of America in the second quarter reported the highest level of delinquencies and foreclosures since it began keeping such records in 1972. . These problems could grow worse if interest rates rise sharply, the economy grows slowly or the United States and other countries succumb to deflation, which causes the real cost of debt to grow. . "We live in a highly leveraged world," said Marc Hendriks, chief economist at Societe Generale in London. "Interest rates are unlikely to rise soon and create a squeeze. But if GDP grows too slowly, debt servicing is going to get ever more difficult." . That is a lesson that many companies learned the hard way over the last few years. Bankruptcy rates have soared in the United States and Europe. . http://www.iht.com/articles/74079.html

Post  43797  by  lkorrow       Reply

Pace, understood. On the economy running counter, I was thinking theirs seems to be on the upswing, developing and expanding from within, while we continue to adjust to a downward, contracting situation exacerbated by the ripple effects of travel/airline challenges.

Post  43798  by  Slotslj       Reply

Lucent to request reverse split at Feb. shareholders mtg. eom.

Post  43799  by  pmcw       Reply

Decomp, I've posted some statistics on this topic in the past. The run-up was VERY thin. The broad market spike in even the 1970's was more significant than the broad market spike that ended in in 2000 for the S&P. In both 1998 and '99 there were more stocks down than there were up. As a matter of a fact, 2001 was the first year in a long time when there were more winners than losers. Over 50% of the market cap lost in the total market (Wilshire5000) can probably still be attributed to roughly 1% of the companies that were publicly traded on 1/1/2000. However, be that as it may, the extraordinary excesses in this narrow group of stocks has caused a broad economic recession and this recession certainly has the power to bring the entire market and economy to its knees. This "narrow" bubble was about as tall as Mount Everest. In other words, the size of the bubble measured in dollars was huge - big enough to make it look as though the entire market was going up at a fantastic pace. However, like I said, there were only a relative hand full of companies involved in the "hyper-bubble". Regards, pmcw

Post  43800  by  jeffbas       Reply

uponroof, why are you posting such garbage about the DJII going below 1,000 eventually. That guy is a nut. He is predicting the entire bull market advance from under 1,000 will be wiped out, without taking the least effort to see what that would mean for individual stocks (building a forecast from the bottom up). For example that would mean IBM and MMM at $10; and MRK and XOM at $5. If you really believe that could happen, and a stable company like MRK could sell at 2 times earnings, then I have a bridge you need to see :-)

Post  43801  by  jeffbas       Reply

uponroof, you and pace should consult on your posts :-) If the yen is way overvalued, and the dollar 40%, which currency is going to appreciate a ton - the Euro? If the answer is no (as I think it is), then there is something wrong with the premise - and I would not want to own Yen, with Japan's finances looking more like those of a South American country every day - plus the good point about competitiveness with neighbor China (and Korea).

Post  43802  by  jeffbas       Reply

Interesting observation, pmcw. I suppose it follows that this might explain why the DJII has had a "standard" bear market decline despite a bear market that has already lasted for longer than the worst ones in the last 100 years, but a Lucent and a 1,000 other tech companies have been decimated. (The economic and debt fallout massacres tech, but not a MRK.)

Post  43803  by  jbennett53       Reply

lkorrow, I thought you might like to see this. Scroll down toward the bottom to see 1988-1998 trade deficit with China. http://www.house.gov/ways_means/trade/106cong/6-8-99/6-8pelo.htm

Post  43804  by  uponroof       Reply

jeffbas...WHOA! calm down. Your insecurity is showing... we're all a little antsy and concerned with the prospects of today's failing markets, and I understand your defensive position, but Robert Prechter is not a garbage peddler. If CBSMarketwatch is offering garbage via Elliot Wave prognostications...which have been far more accurate than herds of today's popular bulls, I suggest you contact them directly and point out their errors yourself. http://www.elliottwave.com/conquerthecrash/ Also, from what I have read here at TABLE over the months, there are more than a few regular residents here who in some form follow what Mr. Prechter has to say. That's not to imply we all worship at his altar, only that we listen to what he has to say. Can we all be garbage consumers as well as bridge buyers? Always remember...one man's garbage (or junk), is another man's treasure. ******** BTW -what are your thoughts on the dollar? Previously I asked the question: "...Is the US gummint working to save the dollar's inflated position in the forex exchange despite the need to depreciate for the good of GDP internals? The list of respected economists and analysts calling for a lower dollar (by up to 25%) increases, yet no indication from Mr. O'Neill that a policy change is in the works....why? Could it be that there is much more at stake than popularly understood?..." to which jeffbas responded (in denying that the dollar was inflated at all): "...uponroof, I do not concede that point. Considering Japan's balance sheet and the potential cost of dealing with its catastrophic banking problems, its currency is possibly significantly overvalued versus the dollar. As far as the Euro is concerned, their social policies in general and toward layoffs in particular stand in the way of long term competitiveness. I wouldn't bet against the dollar there either (long term, anyway - just look at the Canadian dollar)..." Now today we have yet another economic advisor (OECD) calling the dollar as much as 40% over valued. Jeffbas, is it possible the OECD is also peddling garbage? Is there a garbage conspiracy afoot! Seriously, It seems you are equating dollar strength in comparison to the competitions weakness. A flawed theory in light of the global competitive currency devaluation phenomenom, which in an effort to increase exports countries now find themselves competitively devaluing their currencies. Viola! the dollars strength is based in default, or the rest of the field's weakness. So you see, being 'king' of the ghetto (today's global economic morass) is not a position of 'strength' at all. True 'strength' would lead the world's currencies out of the mess we're in, not follow them helplessly down the toilet. I suggest that will start once the dollar finds a lower value (relative to the field) and America again exports it's goods not it's 'intellectual capital'. If we do not resume the lead we will follow others down to China's level. Also, "I would not bet against the dollar" as you say is not the issue. This is not a competitive, 'higher is better' situation....just the opposite (lower is better). Strength will be tested in how the dollar devalues and weathers the resulting storm. How the US will implement intentional dollar damage is the question of the day....and can this intentional damage be implemented without causing a global economic crisis. I rest my case and relinquish your rusted bridge. :-) Good Luck Cheers

Post  43805  by  pacemakernj       Reply

Jeffbas, RE: Dollar/Yen. My call for a potential devaluation of the Yen stems from their inability to solve the mess they created. They are in desperate need of inflation. They have gone over the edge wrt debt levels to GDP. A 50% debt level to GDP is simply unworkable in the laws of economics. IMO, they will be forced to monetize their debt thru massive devaluation of the Yen. I see no other way out. A lot of people will get hurt but se la vie. I wrote extensively back in February on this topic and said that the clock was ticking. It was not a question of if but when. Now subject two. The Euro versus USD. I think the Euro will be the winner by default. A couple of weeks a go I posted an essay from S. Roach wrt the USD must fall 15-20% to ease the burden on the world. He stated that it is the only way out. Today's number on the trade deficit some $37+ billion for September (BTW a record) cannot last. We cannot have low interest rates while at the same time expect to attract $1.3 billion of foreign capital everyday! That is exactly why I've been pounding the table for lower rates. Again, will AG continue to protect the dollar or will he help corporate America finally get back on track. The ONLY way out is a slow currency devaluation. We must get back to inflation otherwise we risk a deflation scenario that imo, will have devastating long term consequences. I have been on this issue since June but for the life of me I cannot understand why AG has been so reluctant to cut rates. With a weaker dollar gold will outperform all other asset classes. That has been my story. But I do acknowledge that AG may fail to cut in November especially if the stock market continues its ascent. Which I am now thinking that will be the case. I have been wrong so far wrt AG cutting rates but in the end I just think that is the medicine needed at this time. It will create other problems down the road but they will be far easier to fix than the deflation scenario staring at us right now. It is incredibly complicated managing all these issues but we must get on with the task. Pace.

Post  43806  by  pdowd       Reply

It was announced today that social security benefits will increases by a measly 1.4% this year based on the current rate of inflation(deflation ? ). Last years increase was 2.6%. Boy I want to see those seniors eyes light up with joy when they get their (average) $13.00 a month raise in January. I am sure that they will spend their way out of this recession with that kind of increase ! Later PD.

Post  43807  by  Decomposed       Reply

pmcw, I'm aware of your previous posts. When I spoke of the huge run-up of the market, I was referring to the valuation of what most of us on Table are interested in: The Nasdaq. During the '90s, the Nasdaq ran from 450 to 5,000. Or did it hit 6,000? The numbers were so big they seemed to blur... Continuing with jeffbas's comparison to the 1970s... I very much doubt that that at its bottom, the Dow was still 300% of its prior low. But that's the case right now with the Nasdaq. In January 1990, the Nasdaq was 450. And, heck, it started moving up even before that! That tells me there's still plenty of room for the tech index, at least, to fall. But perhaps you're right about the runup being "thin." If we knocked the hundred most popular stocks out of the Nasdaq index, I wonder what its ten-year chart would look like?

Post  43808  by  jeffbas       Reply

uponroof, my "insecurity is showing"? Hardly. I will repeat. Anyone (Prechter) saying the DJII is going under 1,000 is peddling garbage; and I have nothing but contempt for writers who try to generate sales by making ridiculous forecasts. I suggest that anyone who disagrees with me sit down with the 30 Dow stocks and put a worst case scenario price on the value of each business and its long term earnings power. You might get 4-5,000, but you won't get under 1,000. I will even start with MRK - worst case $25-30, yield 5%, P/E 9 - about 5 times the price needed for its fair share of a DJII under 1,000. I will bet you could find 5 more Dow stocks like that, such that all the rest would have to go to zero to get the DJII under 1,000. I frankly am missing something in your comments on my dollar point. For the dollar to be overvalued by 40%, I presume the writer means that it needs to drop by 29% on a trade-weighted basis. If the Yen is possibly materially overvalued, I do not see such a correction as POSSIBLE given what is left (Euro, Canadian Dollar, etc.). I do not believe the European economies are competitive enough to support a significant rise in the Euro. If it isn't possible (even if rates were cut to zero), then I question whether it is NEEDED (as a real need is usually also a possibility). I would like to understand what you think I am missing, if you would not mind putting it differently. By the way, although I do not like its impact on stocks, I wonder whether it isn't to the benefit of the world for the economy that is most adaptable in terms of layoffs (Europe sure is not) and in terms of innovation to import some deflation from other places which are less adaptable - indirect foreign aid, so to speak. For example, would it really be better for us to drive interest rates to zero and to export a car somewhere, at the cost of one less Japanese or European car exported there.

Post  43809  by  Decomposed       Reply

jeffbas, Your worst-case scenario (from the previous post) is too optimistic. You put MRK down to a p/e of 9... but in an AVERAGE recession over the last 100 years, the p/e average bottoms at 8. If you're trying to give us a worst-case scenario, you need to go quite a bit lower on your prices.

Post  43810  by  jeffbas       Reply

Decomposed, in fact, that is exactly what the DJII did!! http://clearstation.etrade.com/cgi-bin/bbs?post_id=2442773 If you go with my view that you have a generation of good performance followed by one of under performance, the bull market that ended in the 1960's started from around 200 in the late 1940's, and the correction from the 1,000+ triple top (1966-73) bottomed a bit under 600 in 1974. We could argue about the exact starting price and year, but I think the point is clear. (It really should not retrace all the way, because of real economic growth plus inflation.)

Post  43811  by  jeffbas       Reply

Decomposed, you can't ignore interest rates on competitive investments (or inflation rates). See this post for more info: http://ragingbull.lycos.com/mboard/boards.cgi?board=TABLE&read=43697 If MRK got to a 5% yield, 10 year Treasuries would be yielding near 3.0%. Anyone who would not be willing to switch wouldn't be very smart. However, you certainly could not say that in 1974 about a stock yielding 5%, when inflation was 10% and long term rates were near 8% - which is why P/E's got down to 7 or so then. You can't ignore the relative investment and inflation environment.

Post  43812  by  danking_70       OT: Jeffbas re: not retrace all the way.

Post  43813  by  danking_70       OT: And now, Korea

Post  43814  by  lkorrow       Reply

jbennet, Thanks. Pace had the main interest, I was just offering thoughts, but pretty brutal numbers. On a side note, I read something awhile back that said our export numbers don't reflect U. S. multinationals goods manufactured overseas or mfg and sold overseas, or something like that. Guess I should have paid closer attention, but the bottom line was the trade deficit calculations don't reflect everything they perhaps should. Regards, Linda Other notes (trying to consolidate/reduce posts) CIA Director Tenet thinks we could be attacked soon, but the CNN’s poll of 105,220 people shows 36% believe al Qaeda is less of a threat now than before Sept. 11th. I had to chuckle over this headline, “Massive bird spotted in Alaska,” a bird the size of a small plane. Where’s the photo? No photo, no bird. http://www.cnn.com/2002/US/West/10/18/offbeat.alaska.bird.reut/index.html And last but not least, Chris Manning’s giving some free seminars at the Money Show in NYC Oct. 24-26. I have no affiliation with him, but I attended his evening seminar and he was fantastic. There were a lot of pros in the audience and the guy next to me already took his full course, which was rated #1 in 2000. He also has some seminars lined up in the NY area so here’s the links for anyone interested. I don’t know if I’ll get over to the Money show, but it looks interesting. - Manning 2.5 hour free NY/NJ seminars (http://www.manningtrading.com/index2.htm - Manning 45 min sessions at NY Money Show http://www.manningtrading.com/index2.htm - NY Money Show: http://www.moneyshow.com/newyorkmoneyshow/attendee/index.shtml

Post  43815  by  jeffbas       Reply

danking, that is a good point, I wonder how the index gets rebalanced when you take out a company that is nearly worthless and put in a company like MSFT.

Post  43816  by  pacemakernj       OT: Dan, I am wondering if Carter is going to give

Post  43817  by  danking_70       OT: Pace, as soon as he gets back from monitoring

Post  43818  by  StockmanI7       OT: "Why do they hate us?"

Post  43819  by  danking_70       OT: Stockman re: "Why Do They Hate"

Post  43820  by  pmcw       Reply

Decomp, I think you'll both enjoy and be rewarded by this exercise. What I propose is that you consider the S&P500 of 1973 and the NASDAQ of the 1990's. Consider how they are formulated, their maturity and what went on within the indexes. I agree with you that the stocks most discussed on Table are generally those on the NASDAQ. However, I think it is very important to understand the composition of the bubble, why it happened, why it burst and the collateral damage we are still seeing. All too often, the bubble is discussed in the wrong perspective. Due to this, I feel most think it was a broad market bubble which is far from accurate. I think to simply say that the NASDAQ is triple (actually slightly less than a triple) what it was since the close in 1989 ignores many important aspects of the above areas of interest / importance. I think it also discounts that a triple over 13 years intimates an average return of under 9% per year. That hardly defines a bubble. Heck, we could go back all the way to February 1971 when the NASDAQ started at 100 and have even a harder time substantiating today's close as a bubble. Below is information about the Nasdaq Composite Index: The Nasdaq Composite Index measures all Nasdaq domestic and non-U.S. based common stocks listed on The Nasdaq Stock Market. The Index is market-value weighted. This means that each company's security affects the Index in proportion to it's market value. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Today the Nasdaq Composite includes over 5,000 companies, more than most other stock market indexes. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indexes. Regards, pmcw

Post  43821  by  Decomposed       Reply

jeffbas, No point in arguing. Your logic is WAY beyond my grasp. But, since I don't fully understand, please why you went back to the 1940s in trying to correlate something to the 1974 bottom. Some sort of a 30 year tie? Or do you see a link between a recession's bottom and the bull run that began eight or nine bull runs back?

Post  43822  by  Decomposed       Reply

jeffbas, Nor can you ignore the relative employment environment. We've got a TON of people who have been laid off from lucrative technical jobs... and yet unemployment is STILL pretty low, historically. How do you explain that? My explanation, should you care, is that the good jobs are going away but being replaced with crappy jobs. Which means that, even though the unemployment levels haven't gone through the roof, it's only because there is a LAG in when crappy-job-filling-businesses begin THEIR downturn... and inevitable layoffs. So, I *am* taking the relative investment environment into account. IMO, we've got a lot of Americans who are now in debt to the hilt, earning less than they have in the past, and looking to a future where even the low-paying jobs could be scarce. At that point, the difficult choice for investors will be whether to put money into keeping one's house... or into the market. What do you think they'll decide?

Post  43823  by  Decomposed       ot: Beatles, danking

Post  43824  by  danking_70       OT: Decomp, what do you expect? He's Canadian. A

Post  43825  by  jeffbas       OT: danking, that was interesting reading. A coupl

Post  43826  by  jeffbas       Reply

Decomposed, I was responding to your specific comment, "Continuing with jeffbas's comparison to the 1970s... I very much doubt that at its bottom, the Dow was still 300% of its prior low." I believe I showed that the 1974 bottom of the secular bear market that had its low then WAS triple the low of the secular bull market which started in the late 1940's and ended around 1966. "At its bottom" in 1974 of a little below 600 "the Dow was still 300% of its prior low" of around 200 in the late 1940's.

Post  43827  by  pmcw       OT: VSE

Post  43828  by  uponroof       Reply

jeffbas... don't feel special my friend... CBSMarketwatch received mucho response to the article regarding DOW 1000, which you blew a gasket on. http://cbs.marketwatch.com/news/story.asp?guid=%7B272C2BB2%2DA021%2D45A8%2D9704%2D8135D550AA39%7D&siteid=mktw I'm only the messenger. This is out there in the mainstream, not Matt Drudge or WND, but mainstream. I have to admit I'm shocked at the prospects (1000), but not completely surprised. Good luck Cheers

Post  43829  by  lkorrow       Reply

RSI Moves Above Previous High By Joseph W. Sunderman (jsunderman@sir-inc.com) 10/18/2002 2:55 PM ET It seems all bets are off on the next direction of the nine-week Relative Strength Indicator (RSI). After going down to an oversold 21.60 reading the week of October 4, the RSI has sprung higher like a beach ball submerged in water. The rally of the past two weeks has carried the RSI beyond its regression mean (magenta line) that covers weekly data points since May 1995. Furthermore, the RSI has now moved above the previous RSI high set in late August. The current RSI reading of 45.61 is now approaching the May peak of 48.58. At this point, it does appear that the RSI will continue to edge higher. A move above 48 on the RSI could mean a likely move to the top rail at 60. With another 150 companies from the S&P 500 Index (SPX – 882.39) reporting next week, the volatility that we have seen could continue and dramatically alter the RSI over the coming sessions. Story and chart: http://www.schaeffersresearch.com/sentiment/observations.asp?ID=6392

Post  43830  by  lkorrow       Reply

An In-depth Look into My Style of Analysis on the HUI 10/18/2002 Story and associated chart: http://www.schaeffersresearch.com/sentiment/observations.asp?ID=6389 In my continuing effort to clean out my inbox (a battle I seem to be losing!), we are going to look at a chart of the AMEX Gold BUGS Index (HUI), which was requested by GeeBee in SW Washington. For those not familiar with this index, it is the AMEX Gold Bugs Index and according to the AMEX is made up of the following members: Goldcorp Inc GG Newmont Mining NEM Freept-Mcmo Copper & Gold FCX Hecla Mining HL Harmony Gold Mining HGMCY Coeur D'alene Mines CDE Meridian Gold MDG Glamis Gold Ltd GLG Echo Bay Mines ECO Kinross Gold Corp KGC Gold Fields Ltd GFI Normally, I would just put a chart and move along to another item, but I thought I would stick with this chart and spend a little time today explaining what I am looking at and why. Each trader will have their own approach to the market and I think that the more I can explain what I do, the better equipped you will be to decided whether my commentaries are helpful to you. I would rather have you skip over my commentaries if my style conflicts with yours and it ends up hurting your trading. As I have said numerous times, my commentaries are meant to show what I am looking at and provide some insight into my form of analysis, nothing more. Please, do not take it is as a recommendation. For today's analysis, I decided to take a step back and look at a long-term chart. I think that this is important in order to put the current move in perspective. Monthly HUI Regression Channel Chart Created with SuperCharts by Omega Research There are four items to notice on the chart. The first is the green line, which is the 20-month moving average. I like to look at the 20-month as a quick descriptor of long-term trends. You can see the index spent the latter half of the 1990s trading below this trendline before establishing a firm break above in mid-2001. The second item is the downtrending channel in red. This channel is important because it provides a reference point for a change in trend, which occurred in early 2001. This gives a basis for starting a new long-term, uptrending channel, which is in blue. The final item is the gray support/resistance zone, which sits just below the 90 level. This zone marked support in early 1998. This zone was then tested as resistance through the rest of 1998 and into 1999. With momentum firmly behind it earlier this year, the index was able to take out this resistance and surge higher. Now the index is in the process of digesting those big gains. How far will this consolidation phase go? I can't say. After trading both the internet run-up and the Nasdaq Composite (COMP) implosion, I know that things can take much longer to play out than you would think! But looking at the fact that this index is still above 1) the lower rail of its uptrending channel, 2) its 20-month moving average, and 3) the support zone we identified, it appears the uptrend is still intact. For myself, I am watching two levels, 115 and 90. If the index can manage a rally above 115 (the upper rail of the blue channel) before the end of the month, I would take that as a sign of strength. If the index closes below this rail, I think a pullback to retest the mentioned support is likely. In terms of my trading, that means I am taking a wait-and-see approach at current levels. Above 115, I may look for aggressive opportunities on the long side. I look to enter long positions near support so that I have a defined stop that is close enough to allow me to control losses. Below 115, support is too far away for my style of trading. If the index were to just move sideways for a while, both the channel and the 20-month moving average would converge on the price and provide a possible entry point. - Nick Perry (regressionchannels@sir-inc.com)

Post  43831  by  Decomposed       ot: VSE

Post  43832  by  Decomposed       ot: Correction

Post  43833  by  lkorrow       Reply

Decomposed, a $41K lead!!! Would his id start and and with a "D?" :-)

Post  43834  by  Decomposed       ot: Lkorrow, VSE,