Sand Spring Advisors LLC

For Those Who Insist on Selling Something

July 29, 2002

by, Barclay T. Leib

OK. There now appears little doubt that the equity market reversal we pointed toward last week -- while a bit sloppy on an intraday basis -- basically occured on the right day near the right levels. Our specific trade advice on AOL and GTW may have gone somewhat awry, but we are still bullish this market in the short term. The charts of Sun Microsystems (SUNW) and Erickson (ERICY) deserve some attention for potential short-term rallies from very oversold levels.

And yet, 945-975 on the S&P 500 will represent a band of substantive "neckline" resistance, and we're almost there!

Range trading betwen 845 and 975 on the S&P 500 would thus seem the expected path here. Is it time to sell a few option strangles perhaps, and take advantage of the still high VIX? Perhaps.

Meanwhile for those who insist on selling something, the charts we continue to view with much attraction on the short side include the Head and Shoulders patterns in Heating Oil and Crude Oil, as well as the chart of Copper. Note that these are weekly charts, and the mucking about in the oil complex under the neckline has continued for sometime now. We thus cannot pinpoint when the pattern will resolve itself, but we do think the probabilities are that it will resolve itself to the downside. Copper has already started to show recent signs of breaking lower, and may be indicative of home building trends within the U.S. finally starting to weaken.


Chart constructed using Advanced GET End-of-Day


Chart constructed using Advanced GET End-of-Day


Chart constructed using Advanced GET End-of-Day

Could it be that we are about to get a strong whiff of deflation that the broad equity market interprets in the short-term as being bullish? At the end of the day, collapsing commodity prices would not of course be bullish equities, but such might temporarily give the Fed watchers more cause to espouse rate cuts, and other bullish equity pabulum.

Given all the different chart patterns at hand across different areas, it may well be that we turn more of our attention to the oil and base metal markets in the coming days and weeks. It is in these sectors that we currently smell impulsive moves -- likely down -- brewing.

Non-subscribers are invited to sign up for our premium level of service below, and gain immediate access to our July 8th commentary entitled "Biotech Bottom," as well as our July 16th subscriber-only update. Access to earlier Sandspring.com analysis, as detailed below, is also provided.


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Sand Spring Advisors provides information and analysis from sources and using methods it believes reliable, but cannot accept responsibility for any trading losses that may be incurred as a result of our analysis. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, and should always trade at a position size level well within their financial condition. Principals of Sand Spring Advisors may carry positions in securities or futures discussed, but as a matter of policy will always so disclose this if it is the case, and will specifically not trade in any described security or futures for a period 5 business days prior to or subsequent to a commentary being released on a given security or futures.


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    Within this article we explore what we consider survivable investment themes in today's markets, and two small-cap stocks from down under that may fit this bill. ...
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    • Pension Asset & Liability Blues...March 2002...
      Within this article we explore much misunderstood and underestimated ERISA and FAS accounting that could cause a two-decade long malaise in corporate profitability. We also update many of our previously espoused long and short views.

    • Complicated Moves...February 2002...
      A temporarily bullish look at the DJIA, written in late February 2002, together with a discussion of several value stocks that we like within this market.

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      In this article, we discuss the path we expect into our important November 2002 cycle date, and several specific short selling opportunities in industries as far afield as trucks to bread...
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    • 2002: A Golden Year? ...December 2001...
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      A long-term look at our own cycle theories and how they may potentially interact with the famous Kondratieff cycle
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    • The Importance of June 2nd, May, 2001...
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      A discussion of the fundamental thoughts of short selling hedge fund manager James Chanos within a technical framework
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      A variety of issues we see growing in importance over the year 2001, with a particular emphasis on certain issues within the U.S. food chain.
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    • Measuring Financial Time: The Magic of Pi, February 28, 2001...
      Two centuries of financial history within a cyclical and mathematical framework, including an analog roadmap for the NASDAQ to potentially follow in 2001.
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    • Portfolio from Hell, January 20, 2001...
      a close critique of a major mutual fund manager and a technical look at the individual equity components of their go-go portfolio.
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    • Diamonds in the Sky, Oct. 2000...
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    • The Signficance of Oct 27- Nov 1, Oct. 2000...
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  • Subscribe to Sandspring.com on a quarterly basis and receive all of the the above articles, and all that follow them (a minimum of 3 more per quarter), plus all Chart du Jours (some of which would otherwise be pay-per-view) for just $65. THIS INCLUDES OUR June 3rd. UPDATE -- "The Coincidence of Time" -- as well as our FULL ARTICLE of July 8th entitled "Biotech Bottom" and July 16th update to it. Within this first update, we touch on three separate approaches to the market that all pointed toward a violent June 2002 market low. In the latter article, we discuss the potential for a large tech and Biotech market bounce into early November 2002, and potential plays within the Biotech sector that may benefit from such a rally.

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