UPDATE FOR WEEK ENDING 9-27-02 

  The plurality of our indicators are painting a picture of rather weak markets, unable to attract buyers, suggesting that the current prices are not creating demand among investors, thus, we should expect prices to fall even further in order for demand to pick up. The rising Thrust Oscillators and Buy/Sell Equilibrium indexes, imply that  we can expect another short bounce anytime during the week, but overall we should be looking for lower prices. As you know, we have maintained  that the July lows were not of any significance, and thus, they will be eventually taken out. However, at this point, we think investors should probably be focusing  more on what may come afterwards, and start making some  plans in the event that the markets do sell off sharply over the next few of weeks and then they rally even more sharply. Consider the following: the markets have been selling off non-stop for 6 consecutive months, and they have been down for 8 out of the last 9 months. The last time we saw similar action was during the second leg of the bear market which lasted between September of 2000 and March of 2001. See charts below:

 Whether the markets find support 7%, or 10%, or 12%, below current levels,    in our view it is irrelevant. What is really relevant at this point, is this: the next 12%-15% move -in all likelihood-it will  be on the downside, but the next 40% move will be on the upside! So, while we remain bearish until our indicators  tell us otherwise, we are also preparing a plan for action ready to be implemented when the markets do turn around. 

UPDATE FOR WEEK ENDING 9-20-02 

This week's conclusion is rather straight forward. All indicators that measure oversold/overbought conditions are at levels that suggest we should get a bounce. Even the bearish scenario that was generated by our forecasting model on 9-15-02, calls for a bounce this week before the market turns back down again. However, we must keep in mind that the technical deterioration is such, that the markets can go another 5% to 10% lower from current levels over the next 3-5 days, despite how oversold they are at the present time. thus, look for a bounce, but do not get surprised if it does not happen, and if you are holding long positions use some tight stops. 

Last week was characterized by further deterioration in the indicators -which is negative. However, price with regards to the Dow and the SP500 held above support, which is positive, and it explains why our model still remains neutral for those two indices. On the other hand we did get a "sell" signal for NASDAQ. It should be noted that even if the low probability scenario comes into fruition, the upside target is still the most recent highs at the 1400-1425 zone. When we weight all the evidence, we ought to have a negative bias here. However, we also ought to be flexible because price -the most important indicator of all- has held up reasonably well. The deterioration in the indicators implies that we should get a further deterioration in price and we should be ready for it, however, until it actually begins to happen, do not get too bearish. Having said all that, we also must say that more evidence -which Mr. Iossif will present tomorrow in an interview with Dan Bistline- points that the 4 year low is ahead of us, not behind us, and we should be expecting it sometime over the next 3-6 weeks.

  The key thing for next week is whether the indices break above last week's highs, OR, below last week's lows.  Since the indices are still very overbought, the odds do favor  that last week's lows will be broken. However, if the rally is for real the indices should not violate the first downside target, and most of the indicators should remain above zero. In that case, we will have a "buy spike" and an entry point for intermediate term investors. Thus, the expectation is to see weakness during the first 2-3 days of the week, and then a resumption of the rally. If the markets do rally Monday, pay attention to resistance. A failure at last week's highs early in the week, will result in a sharp decline later in the week.

All of our indicators are in deeply overbought territory, while the indices are up against significant resistance. Therefore the odds do favor a pullback. Given the overall improvement in the technical condition of the markets, the pullback should not cause the indicators to turn back below zero, and the indices should not violate their July lows, in fact they shouldn't retrace more than 50% of advance since those lows. If these conditions are met, we will have confirmation that the intermediate trend is up, and we should be long the market.  Since the odds do favor a pullback, we ought to be short-term bearish, but intermediate term neutral with a  bullish bias. If the conditions discussed above are met then obviously we will turn both short and intermediate term bullish. Can the market defy the odds and bust right thru resistance next week? Of course it can! It won't be the first, or, the last time. However, in making decisions where money is at risk, we do not try to beat the odds, we try to maximize our return-to-risk ratio by placing our bets on the outcome with the higher odds. Based upon the historical data available to all of us, right now the odds do favor the short side that is why we shorted Biotech on Friday and we plan to short the Dow on Monday if the weakness we are anticipating does materialize. The reason for using stop losses is to protect precious capital from large losses in the event the markets do defy the odds!