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We
said in our last newsletter that we believed positive
earnings/future guidance were going to be very company
specific. The majority of companies would be reporting
disappointing earnings, lowering future expectations or
both. As the month of October progressed, it became
apparent that our beliefs were rather correct.
Furthermore, the last NASDAQ sector that was left
standing -fiber optics- went down in flames as soon as
Nortel issued a revenue warning -joining the rest of the
high tech casualties- Although, we issued a short-term
“trading buy” signal we warned that any rally was
going to be nothing more than a bear market rally, and
in our daily/weekly updates we advised investors to
employ “tight stops” in their long positions.
Many “analysts” from big brokerage houses -whose
biased and tainted opinion, in our view, is not even
worth the paper is written on- have steadfastly
maintained that nothing has changed, and that the
current “correction” is one due to a
“perception change” and not one due to a real change
in fundamentals We categorically disagree. First of all,
there has not been one phone, or, ISP company that has
not announced less spending for the foreseeable future,
second, the IPO market is closed , third, the bond
market is also closed. So where is the money going to
come from, for the “unabated growth” forecasted by
the highly paid analysts whose real job is not to
accurately analyze a company’s fortunes, but to issue
favorable reports, so the brokerage house can continue
to realize revenue
growth from underwriting
fees! We will say it again and again: make no mistake,
NASDAQ is in a bear market, rallies -although sharp-
will be bear market rallies. And that brings us to our
next topic of discussion. Has the recent decline -fueled
by uncertainties on the political front- run its course,
and is NASDAQ near an intermediate bottom, from which
another bear market rally will soon begin? The answer in
our view is YES! On page 3, you’ll find charts of the
20 day, 30 day, and 50 day aggregate oscillators for
both NASDAQ and the SP500. We assumed that NASDAQ falls
to 2750, and SP500 to 1300. As you can see, even if that
happen over the next few days, positive divergences will
take place -similar to the ones that took place in May,
prior to the rally that lasted into the end of August.
The divergences we are referring to, have to do with the
oscillators making a higher low, while price will be
making a lower low, thus providing a non-confirmation of
the new low, and setting up the stage for another bear
market rally, which should last several weeks (4-6) We
also run a probability study with regards to possible
levels for NASDAQ and the SP500 over the next 5-10 days,
the results are also on page 3.
Currently we remain on the “sell
signal” we issued on 11-8, however, we expect , after
the markets reach lower lows over the next few days,
that a rally will take place, and it should be worth to
be long into
Our
Market Positions:
Dow: Bearish ,SP500: Bearish
NASDAQ:Bearish
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AEGEANCAPITAL
GROUP INC.