Is the stock market near the bottom?

**AuntieEmma**[$] · #1 06-30-2002, 04:39 AM

Folk wisdom says that when everybody is getting into the market, then the market is near or at a top and is ripe for a crash, and that when everybody is getting out, the market is near a bottom and will soon turn around.

It certainly was true about the top. I remember when there were huge headlines almost every day in the newspaper about NASDAQ hitting new highs ... and it was immediately after the time that the headlines grew the largest and were appearing the most often that the market crashed. Now it's the exact opposite: we've got the headlines almost every day about how everybody is getting out of the market.

So are we near the bottom? I think maybe so, but here's an article quoting another bit of folk wisdom -- "don't try to catch a falling knife" -- and saying there's a 50 percent chance that NASDAQ will fall to 1000 (it's now in the 1400s):

http://story.news.yahoo.com/news?tmp...ocks_week_dc_1

brian_igo · #2 06-30-2002, 05:11 AM

No, I don't think we will find out where bottom is until the first quarter of next year, at the earliest.

Right now no one knows who has been cooking the books, and that will make the market very volatile. Even after the last of these frauds get run to ground, it will take a good while for the market to stabilize and for investors to have confidence again.

With what has happened so far, I think bottom for the Dow will be 7,000-7,500. If there are more fraud revelations (particularly from GE) or if the scandal spreads to banking and the brokerage houses, then all bets are off.

I don't think you could get me to invest a dollar on a NASDAQ stock at gunpoint right now. I think a close below 1,000 at the end of the year is very possible. Its a shame because I think some of the tech stocks (notably Intel and Microsoft) are incredibly undervalued right now. The question is, how much further will they be dragged down by the rest of the tech sector?

I have a little Intel and some SWA. I'm not selling but I'm not buying, either.

Brian

erik_kosberg · #3 06-30-2002, 09:51 AM

At bottoms, price earnings multiples are often in the range of 6 to 8 based on GAAP, but they’re still way higher than that now and many P/E ratios are now using pro-forma numbers. I’m guessing that you ain’t seen nuthin’ yet and that market lows won’t be reached until 2004 or 2005. At least another 50% more on the downside? JMHO

**Joubert**[$] · #4 06-30-2002, 12:41 PM

Interesting premise. A month ago, I would have said yes. I was watching Lou Dobbs the other night, and he suggested that there would be a rush of restated earnings late summer just before CEOs had to start swearing to the accuracy of their statements. More restatements might actually serve to help boost confidence as individual investors think, Okay, that's probably most of them.

But even so, I don't think the market is bottomed. I do think folks are going to start value shopping blue chips later this year, but in nowhere near the numbers necessary to prop the market. I also think those companies who make durable goods are going to fare better than tech, telecom or any one else that doesn't have a ton of physical property sitting on the balance sheet.

vonboob · #5 07-03-2002, 02:11 AM

I'm in bonds and money markets ever since BCI INC. got rid of Nortel and don't plan on reinvesting just yet. One of my old friends used to say: it's a race horse! If you don't want to be tossed, take your time getting on but better to jump off early than too late...

erik_kosberg · #6 07-03-2002, 02:43 PM

Maybe today’s a really important day for the markets? The London market closed at a five-year low. I’m only only a Technical Analysis newbie but I’ve read on several investing sites that 944 is a critical support level for the S&P 500 (it’s a double-bottom formed back in 1998). On an intraday basis, we hit 934.87 today. Technical Analysis might be thought to be a bit of mumbo jumbo but many people swear by it so it can become a self-fullfilling prophecy.

**Joubert**[$] · #7 07-05-2002, 04:43 PM

Anyone wanna speculate on today?

The S&P was up 35 points. I would say that's significant. (Although if I hear one more newscast lead with "The Dow yadda yadda..." Who cares?

But I'm happy. I have 8 in my "mad money/play" portfolio and 7 of them were up - two of them more than 10%.

brian_igo · #8 07-05-2002, 06:44 PM

I don't read anything into an abbreviated trading day wedged between a holiday and a weekend.

Looking at the most active lists, kinda funny that everything that shouldn't be up-was. GE, Tyco and AOL on the NYSE and look at all the chip and hardware techs on the NASDAQ. Maybe the market is finally realizing that Intel at $20 is about half what it should be right now. But I don't think so.

Anyone want to bet against a lot of profit taking at the opening bell on Monday?

Brian

**Joubert**[$] · #9 07-05-2002, 11:57 PM

Quote:

[i]Originally posted by brian_igo

Anyone want to bet against a lot of profit taking at the opening bell on Monday?

Brian [/b]

No bet here.

Magick1 · #10 07-06-2002, 12:32 AM

no matter which portfolio I look at. Virtually all down!

(at least I am still "fairly" young, and I have a long time to recoup and ride out the storm)

We'll just have to see where it takes us. I think it's going to be a long, bumpy road, and it will be a while.

(I also wish I had a lot of play money available to start grabbing up some of these stocks that I have dreamt about for years, that were always just a bit out of reach...because, now, they're in reach!) Doesn't it always go that way?

**AuntieEmma**[$] · #11 07-10-2002, 04:58 PM

Quote:

Devastating declines in the drug sector pounded the Dow, sending the blue-chip gauge to its lowest level since early October. And the Nasdaq was just a whisper from the 5-year low reached last week amid more bloodletting in the chip sector.

So much for last week's turnaround.

And on the question that started this thread, an analyst said:

Quote:

For those hoping that each day's heavy declines represent capitulation, Hughes said: "Capitulation only occurs when nobody realizes that it's happening."

But then nobody believes what analysts say anymore, right?

http://biz.yahoo.com/cbsm-top/020710...4ed9f71_1.html

**AuntieEmma**[$] · #12 07-15-2002, 03:33 PM

This is from briefing.com's Story Stock page:

Quote:

10:14AM Technical Levels : So the markets continue to look relatively ugly. In our last update, we pointed to the importance of Dow support at 9,000 and the implications of a failure to hold that level on the close. The key point went something to the effect of -- 'If the index should fail to hold 9,000 on a closing basis, that may be the trigger for those reaction lows -- the panic selling or capitulation -- that so many technicians are seeking.' Well as it turns out, the index did fail to hold support at 9,000, and it has indeed sold off hard. Last week, the Dow put in its fourth largest weekly point loss, dropping 695 points or 7.4% to finish the week at 8,684. With both the Nasdaq and the S&P 500 already at five-year lows, many would contend the sell pressure on the Dow is no significant surprise. In the current market, nothing is truly a 'surprise' but it's worth noting the Dow had traded essentially flat over the prior four years. A comparison of the Dow and the Nasdaq on the four-year chart points to the Internet-driven bubble on the Nasdaq, as well as the Dow's lack of participation to the upside. So while the Dow may have some work to do carving out a bottom, don't look for it to lose 75% of its value as the Nasdaq has. A look at the four-year chart on the Dow (without the comparison to the Nasdaq), points to a few areas technicians will be watching. Points of interest going back to September 2001 include support in the broad range of 8,567 to 8,605, followed by more modest support at 8,357 to 8,376 and a more important floor at the September 21st closing low of 8,235. It's also probably worth noting that the intraday low on September 21st was 7,927 which suggests a test of support in the 8,000 area is not entirely out of the question. -- Mike Ashbaugh, Briefing.com

erik_kosberg · #13 07-16-2002, 02:05 AM

Mark Rostenko’s latest commentary (“Bubble Bubbles, Plenty More Troubles...”) is a hoot:

Quote:

No matter how far the market falls, the idiocy never ceases. MSNBC dazzled us last week with repeated helpings of brilliant and highly informative quotes like these:

"Many analysts say there's no way to predict when stocks will recover." Duh. So why do they keep getting paid for trying to do just that? Off with their heads, I say.

"'All of the conditions for the end of a bear market and the start of a bull market are in place,' said Johnson. He ticked off market liquidity, low interest rates, a rebounding economy and improving corporate profit picture. 'If you have those conditions, you ordinarily have a bull market.'"

Ordinarily stocks of worthless IT companies don't sell for $300 a share. Ordinarily 20-year old kids with no business experience don't become the heads of multi-million dollar start-ups overnight. Ordinarily the stock market doesn't triple in five years.

So what? Anybody who thinks that conditions are "ordinary" ought to lay off the crack pipe, pull their heads out of their pants and take a good look around. This is no ordinary bear market. This is a long-term secular decline, the inevitable unwinding of a massive financial bubble. Nothing about the bull market was "ordinary". So what sense does it make to expect the bear market to be "ordinary"? The bigger they are the harder they fall and what goes up must come down. You don't get something for nothing.

**AuntieEmma**[$] · #14 07-26-2002, 02:38 PM

From the briefing.com ("Story Stocks") quote I posted above on 7/15:

Quote:

A look at the four-year chart on the Dow (without the comparison to the Nasdaq), points to a few areas technicians will be watching. Points of interest going back to September 2001 include support in the broad range of 8,567 to 8,605, followed by more modest support at 8,357 to 8,376 and a more important floor at the September 21st closing low of 8,235. It's also probably worth noting that the intraday low on September 21st was 7,927 which suggests a test of support in the 8,000 area is not entirely out of the question

So far, this doesn't seem to be too far off -- the Dow has been levelling out at a bit over 8,000.

I'm always looking for crystal balls -- I know, that's a dangerous thing to do, but it's irresistable -- and I've found that in general, briefing.com tends to be pretty good.

I was wondering if there were any websites that people use that they've found to be relatively accurate, crystalballwise?

erik_kosberg · #15 07-26-2002, 03:41 PM

FWIW, I ran across this while surfing. Not sure who originally wrote it:

Quote:

As a non-resident, non-US citizen, let me say this - while I know lots of wonderful Americans, I'm not going to finance your deficit/wars in the Middle East/Homeland Security/derivatives blow up. Multiply me by several hundred million and you have a buyers' strike for US government debt. Uncle Alan can print as many dollars as he likes, but the rest of the world has seen behind the façade and is in the process of downgrading them to junk status.