The Chart du Jour

A Bear Gone Fishing

July 10, 2000

By, Barclay T. Leib

For the coming week there will be no updates to as I will be travelling. Before departing,however, I can only offer diehard equity bears both warning and solace. The solace part is that in the long run, the bears will of course be right. The current equity environment is a silly one with no particular grounding in true investment fundamentals. The warning part is that the current S&P 500 chart pattern looks poised to vault higher.

Chart courtesy of

On several occasions last week, the S&P tested and bounced off of strong moving average support. Specifically, on the chart above we nicely held the 40-day and 100-day moving averages as well as the bottom of the 2-standard deviation Bollinger Bands . As long as last Thursday's low on the S&P 500 cash at 1439.60 is not broken, then all should be healthy and happy in this market in the short term.

Will this be a 1-week rally, a 2-month affair, or something bigger than that? We are not good natural bulls, so we'll reserve comment on that, and just watch how the price action develops. Astrologically the week of July 17 is of potential importance, but beyond that, we see another more important convergence of cycle turns being due in the period between September 13-20. Although we continue to doubt that the Nasdaq 100 will come anywhere near its March, 2000 high, new highs in the NYA and Value Line Index continue likely into this latter time window.

Might it be possible to see this final rally transpire without Micron, Intel, and Cisco in the lead? That would certainly be a new phenomemon on Wall Street, and possible, if not just a refreshing change of pace.

Whatever sector takes the lead, though, one thing remains true: we suggested covering shorts in late May just in front of the Nasdaq's first 8% reversal up. Since then, we have been broadly neutral. Now, this generally bearish analyst is in full retreat -- waiting patiently for the day in the future when fundamentals instead of momentum will once again be of more importance -- when America's current undefatigable bullish herd finally subsides. That day is not here yet, nor do current chart patterns suggest its immediate arrival.

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