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the American Society of Shortsellers
Dr. Stepan N. Stool, A.S.S. Chair
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Dr. Stepan N. Stool
Chairman of the Department of Stock Proctology
A.S.S. Endowed Chair
American Society of Shortsellers Endowment
American Academy of Stock Proctology
December 30, 2001
Where Have All The Bears Gone (1/3/02)
Long time packing. That's where. No
surprise, the bulls took the indexes up through major trendlines, and
kicked off a wild stampede in the process. They were helped along in great
measure by panic stricken bears in full crapitulation mode. Some even went
so far as to swear off ever trading again. (ahem). The Nas tacked on 65 to
close at 2044, with hardly anything all day that could be called a
downtick.
The Sphincters were only able to gather up enough steam for a modest
push, a mere 10.65, to close at 1165. There were a couple of minor
pullbacks during the day to as low as 1156. While both indexes did break
major downtrend lines, driven largely by that mindless stampede in tech,
neither made a new high. Nor did the Dow, but barely. So, which came
first, the mindless stampede, or the trendline break. Let's just say the
breakout added to the mindlessness.
Is this the beginning of a new bull phase, or one of history's great
sucker plays. We might know the answer to that Friday, but at this point I
don't know. With 50 bil from the Fed in the last week, anything can
happen, and usually does. Even is a lot of that is sopped up by JP
Enrontino and Co., a lot of that money may have nowhere to go, and could
therefore end up chasing rising stock prices, just like dogs chasing their
tails. Institutional madmen and momentum traders don't give a crap about
bad news or valuations. They care only about one thing. What's moving. If
there's any loose change floating around, you can bet they'll spend it.
Cripes, it ain't their money, so who cares?
If they mange to break out to new highs on Friday, it doesn't mean
anything unless they close there. We all know what buying climaxes look
like, and this could be the day. A huge upside move in the morning,
followed by a late selloff to unchanged or worse, would signal the end.
Otherwise they could go a lot higher, as indicated by worst case,
intermediate centered moving average projection of 2250 on the Nasty. This
does not have to happen, but unless we get that reversal day, my guess, at
this point, is that it probably will. Here's the oogly picture.
Here's a great view of the trendline break on the SPX, while at the
same time, the VIX indicates the super complacency usually associated with
at top. Momentum indicators still suck. This is what chartheads like to
call a negative divergence. Negative divergences don't mean a heck of a
lot, unfortunately, until the market actually reaches a double top or new
high and then turns down. Sometimes the divergences resolve in the upward
direction, but when they don't and the upswing stops, that's usually a
reliable sell signal.
The cycle picture on the SPX also suggests that nothing's changed. An
up day Friday might do it, but the burden of proof is on the bulls to
sustain the rally. I don't think they can.
Copyright
2002 by Capitalstool.com. All rights reserved. Charts courtesy of
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