Posted on 11/21/2002 6:02:46 PM PST by rohry
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Market WrapUp for the Week Week in Graphs Storm Watch Geopolitical News Energy Precious Metals Raw Materials Thursday, November 21, 2002 Only "The Market" Knows For Sure
Everybody's Got a Move It is this money that the Fed and Wall Street hope come back into the markets. As of today, it looks like some of that money may have moved off the sidelines. Well know tomorrow when weekly mutual fund flows will be released. As of September, money market funds represented 36 percent of mutual fund assets with bond funds representing another 18 percent. It is this 54 percent of assets lying around in money market funds and bond funds that is needed to keep this market running higher and on firmer legs. PARTY TIME! This is a high-octane speculative rally. So if youre going to play and trade it, you would be better off buying ETFs such as spiders, diamonds and the Qs. The ETFs are closed-end mutual funds that trade on the exchanges. Unlike regular mutual funds you can trade in and out of them at any time. You dont need to wait until the end of the day to buy and sell. Furthermore, if you are trading this high risk market, you should be putting in protective stops on your ETFs 7-10 percent below your entry price and move those stops up as the market advances. Avoid even and round numbers. There is a tendency for round numbers to stop advances or declines. Don't Worry, Wallflowers The Chaperones Are Watching Looking At The Dance Card The following Fibonacci graphs of the Dow, the S&P 500 and the NASDAQ show typical retracement levels. If you are non-technically oriented, Fibonacci numbers are based a number sequence discovered by Leonardo Fibonacci in the 13th century. The number sequence is 1,1,2,3,5,8,13,21,34,55,89,144 and so on. These number sequences have almost constant properties such as any two consecutive numbers equals the next higher number. An example would be 3 and 5 equals 8, 5 and 8 equals 13. Fibonacci numbers are used in Elliott Wave and measure a retracement move. So for example, if an index or stock price moves from 100 to 200, any retracement can be measured in terms of probable outcome. Any market move, whether it is up or down in a primary trend, will move in a countertrend direction. A particular market move will retrace a portion of its move before resuming its former trend in the original direction. This countertrend move tends to fall within certain percentages. Retracement moves can be measured in one-third, two-thirds or 50 percent. Fibonacci moves are 23.6%, 38.2%, 50%, and 61.8%, 76.4 % and 100%. Most countertrend moves are usually contained within the one-third to two-thirds range. If the retracement or countertrend move goes beyond the two-thirds point, it probably means a trend has been reversed. That would mean a bull market correction had turned into a bear market. Or in our present case, a bear market rally had turned into a new bull market. The three Fibonacci graphs below show the Dow, S&P 500 and the NASDAQ from their earlier peaks. Regarding the Dow, the retracement has already retraced 38.2% of its earlier decline and is now heading towards the 50% retracement level. The Dow should find stiff resistance at 8,935 and should be stopped at 9,345. If this recent move surpasses those new points, and especially 9,345, the emergence of a new trend would have to be considered. For the S&P 500, the index has already retraced 38.2% of it downtrend. The next key retracement levels are at 971 and 1019. For the NASDAQ, the next key levels of resistance should be 1527 and 1626. And The Record Changes to a Fast Dance Todays GE announcement that they were cutting their 2002 forecast and kept the 2003 forecast at the lower-end of estimates will be the first time in a long time that GEs bottom line growth will be in the single digits. GE also announced that their reinsurance unit would post a $1.85 billion loss. GE pulled a rabbit out of the hat by announcing they would raise the dividend by a penny. The penny dividend increase caused the shares to rally by $2.05 to $26.85. As mentioned earlier, the markets want to have a party. Forget the news. It is only background noise at the moment. The market is simply doing what it wants to do and not what it is predicted to do. It is usually at these times that surprises tend to surface. If you want to trade it, do so carefully. Use only ETFs and with tight protective stops. If you are a bear, wait patiently, accumulate precious metals, strong foreign currencies, defense stocks, water, and food and necessities -- in other words, "things." Things have broken out into a new primary trend and very few investors see it. Today's Market Overseas Markets Asian stocks rose after Hewlett-Packard Co. posted fourth-quarter sales that topped some analysts' forecasts. Canon Inc., Trigem Computer Inc. and other suppliers to the world's second-biggest computer maker gained. Japan's Nikkei 225 Stock Average advanced 2.5% to 8668.06. Bond Market |
this has been a market that has gapped up, gone sideways and swooned both up and down, leaving most investors without a clue.
There is also no cue given to jump in.
reminds me of the old story about a traveling salesman who gets skinned in a poker game....the next day his friend asks.."didn't you know that game was crooked?"...the guy says..."yeah, I knew...but what the hell, it was the only game in town!"....maybe that's what's going on with folks buying into companies like JDSU....they figure they better get a seat at the game while it's cheap; only this time they they think they won't get skinned.....
As always, thanks Rohry....and good luck to all.
Stonewalls
I gave this bear market rally a top of 932 on the S&P 500. We closed today at 933.76. Now things are really going to get interesting. Short and getting shorter.
Richard W.
"Whom the gods would destroy, they first make mad."
I gave this bear market rally a top of 932 on the S&P 500. We closed today at 933.76. Now things are really going to get interesting. Short and getting shorter.Considerably shorter than Bernie Schaeffer's 10/29/02 bear-market rally forecast of S&P 1100-1160.
Richard W.
Nodding head in agreement.
I think the effort will last until Dec 31 or when ever the year end bonuses are calculated.
That is definitely a big factor. Money manager fees are largely based on a % of total assets. They have to keep prices inflated to increase the fees. Plus they can use any rally to suck in more money.
Richard W.
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