Sand Spring Advisors LLC
Returning to Our Roadmap
August 7, 2002
by, Barclay T. Leib
We apologize for having been quiet for the past few days, but despite all the wild equity index goings and comings, we find little new to say from previously espoused bullishness for an irregular counter-trend rally into November. We do not know what the headlines of the coming months will be, but we do think they will temporarily look better than todays' headlines. It would not even surprise us if Osama Bin Laden is suddenly found.
We say all of this having spent the last several days reviewing many of Sandspring.com's earlier articles and postings. Many moons ago, several subscribers asked us to compile a more formal "track record" of our espoused ideas, and how they panned out, and we are indeed endeavoring to construct such a table at the current time. Clear however in our initial perusal of 1999-2001 articles is that we have had a great tendancy to be early, and while our Fibonacci band targeting technique occasionally works to a "T", more often targets can be overshot for a week or two -- seemingly before the magnet of having gone beyond a Fibonacci resistance zone reasserts itself.
So it would seem our recent July bullishness was premature and our targets overshot once again. In one of our first articles written on Sandspring.com back on February 29, 2000, entitled "Nasdaq Crash and First Downside Stopping Point," (released today for the first time to the public in the Earlier Articles section of the website) we were pointing toward a 4391 upside target high on the Nasdaq 100 followed by a collapse to a first target range of 2,726-2,793. The eventual spike high on the Nasdaq 100 was actually 4,882, but with a closing monthly high of only 4,457. When the inevitable reversal and sharp initial drop came, the first downside low was at 2,902 -- a bit above our espoused "first stopping point." So were we off in our prognostications by a bit? Yes, most certainly. But did we have the right general instinct and trading strategy? Yes, again, and versus the closing monthly high, our call really wasn't that bad given the subsequent 35% decline experienced by the Nasdaq 100 in just 2 months -- a move few could have even fathomed occuring at the time. It is simply hard upon occasion to guage an emotional throwover beyond a Fib target, and we inevitably seem to be early pointing toward brewing trend changes.
In that February 2000 article, we compared the Nasdaq 100 chart to a previous 1980 chart of the price of gold. Both appeared as parabolic bubbles, and we proposed the gold chart as a potentially useful roadmap. We have now updated our comparison below, and used a minor bit of interpretive labelling of "months up" and "months down." We have not changed however the fact that gold topped in January 1980 and made its first bottom of any magnitude 29 months later in June 1982. In the current instance, the Nasdaq 100 topped in March 2000, and 29-months later is this month: August 2002. Any normal individual can see the great similarility in structure between the decline of these two markets.
From here, we must insist that the Nasdaq 100 is overdue for a sharp bounce period into November that looks like it could then extend into a secondary marginal new February high. Measured from November 2002, however, we generally see 2.15 years of sloshy down markets beyond that high until early January 2005. It will be during this latter period, not now, that equity volatility will truly start to diminish and CNBC will be losing viewer eyeballs right and left.
It's truly time for equity shorts to stand aside, and focus on other things. Bearish yen (bullish the dollar); bearish crude oil; and temporarily positive equities (as much as it disturbs our longer-term bearish proclivities) must be the way we remain.
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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