The Chart du Jour

The Chop Up

December 6, 2000

By, Barclay T. Leib

Overall, we expect to be talking about equities far less for a bit than we have been in past months. This week likely marks the beginning of a corrective period of chop that will simply be less interesting and less dynamic than the last several months. Yes, the NYA Index could scurry up to even higher new highs, and maybe even the Dow Jones could do the same, but basis the Nasdaq market, we think the pattern set by the Nikkei in the early part of its 1989-2000 decline, and as outlined by on a percentage fall basis, is most likely to transpire. We picture this chart below together with a look at the current Nasdaq 100.

Chart courtesy of

Chart courtesy of

Our best guess would be a small five wave advance to above the 100-day moving average to encourage the bulls; then a pullback in a B-wave; and then another more anemic final attempt at advance. Net, net we'll likely toy with the 100-day moving average, maybe even get through it, but likely come nowhere near breaking back up through the 200-day moving average. It will be a sizable and sharp bounce (as it has been already) -- but at the end of the day, the sea legs for sustainability of this advance are suspect. The risk-reward of aggressive positioning in this market will also be reduced. Bulls and bears will both become frustrated and a temporary lull in trading may eventually transpire.

In all estimation, this Christmas might be a good time for a stock trader to just stay flat and enjoy the holidays.

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