Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] Market psychology
Date: Tue, 23 Jul 2002 15:11:23 -0500
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This is a multi-part message in MIME format. - ------=_NextPart_000_00DD_01C2325B.351CFC60 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Hi Jon, Here's a point of view on the notion of capitulation from an excellent = technician and market veteran, John Mendelson. It's awfully hard to say = how the market will find its bottom, and it's very possible that we may = get some "false" FTD's. But I do know with certainty that there will be = no sustainable upturn *without* a FTD. Katherine =3D=3D=3D=3D=3D=3D=3D=3D=3D Weekly Market Analysis John A. Mendelson July 23, 2002 A View Of The Market Some Recent Questions From Clients: Do you expect to see a capitulation by investors before this decline = ends? The prospect of capitulation, or a climatic downward trading spike that = exhausts the selling, appears to be very much on the minds of many, particularly the financial = press. The "need" for this has been mentioned in numerous articles. First of all, nobody knows for sure if this event will occur. We have = clearly seen an acceleration of selling in the last two weeks that has moved the market = to an extreme extended or "oversold" position. In this regard, 99% of the stocks in the S&P 500 = (SPX - 820) are below their ten-week average, a higher percentage than September 2001 or October = 1987. Furthermore, actions reflecting investor sentiment such as the CBOE Put/Call Ratio, the = ten-day average of the Arms Index (TRIN - 1.67) and the NASDAQ Trin (TRINNASD - 0.62), measures of = buying and selling pressure on the market, and my proprietary "Diaper Indicator" all are at = or near historically extreme levels, as is the CBOE OEX Volatility Index (VIX - 48.23). Furthermore, = NYSE short interest is now the highest in history and the dividend yield on the S&P 500 is = higher than that of six-month U.S. Treasury bills, a most unusual event in modern times. My point is that one might say we have already had a "capitulation." I = would also note that the 1973-1974 bear market, the worst I ever saw, ended on October 3, = 1974 with a "whimper, not a bang" after twenty-one months of slow death on low volume.there was no = capitulation. In addition, the 1929-1932 bear market bottomed on July 8, 1932 on volume = well below many days in the prior two months. Who knows? . my personal view is that investor = capitulation is not "needed" to form a bottom and that many sentiment indicators are at more = extreme levels than at previous historic lows. ----- Original Message -----=20 From: J. Lobatto=20 To: canslim@lists.xmission.com=20 Sent: Tuesday, July 23, 2002 2:59 PM Subject: [CANSLIM] Market psychology All the professionals are looking for a massive capitulation day to = mark the termination of this bear market (i.e. an obvious panic day when = they can start pouring money in). Using the fact that the market rarely = satisfies the majority of participants, I suspect that the professionals = may not get their wish. As such, one other scenario comes to mind: The market continues this relentless water torture for an = indeterminate amount of time and finally the bear market ends at some = point with a whimper barely noticed by anyone, that is a new low is made = on a fairly "normal" day and the market starts climbing back up the next = day, either A) explosively or perhaps B) gently and imperceptibly and = basically doesn't look back from that day on. Any other non-capitulation scenarios that any of you can come up with? = The reason I ask is that with my "B"scenario, we may not get the FTD day = that will ring the bell for us either. Jon - ------=_NextPart_000_00DD_01C2325B.351CFC60 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable <!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN"> <HTML><HEAD> <META http-equiv=3DContent-Type content=3D"text/html; = charset=3Diso-8859-1"> <META content=3D"MSHTML 6.00.2716.2200" name=3DGENERATOR> <STYLE></STYLE> </HEAD> <BODY bgColor=3D#ffffff> <DIV><FONT face=3D"Times New Roman" size=3D3> <P>Hi Jon,</P> <P>Here's a point of view on the notion of capitulation from an = excellent=20 technician and market veteran, John Mendelson. It's awfully hard to say = how the=20 market will find its bottom, and it's very possible that we may get some = "false"=20 FTD's. But I do know with certainty that there will be no sustainable = upturn=20 *without* a FTD.</P> <P>Katherine</P> <P>=3D=3D=3D=3D=3D=3D=3D=3D=3D</P></FONT><B><FONT face=3D"Times New = Roman" size=3D5> <P>Weekly Market Analysis</P></FONT><I><FONT face=3D"Times New Roman" = size=3D5> <P>John A. Mendelson</P></B></I></FONT><FONT face=3D"Times New Roman"> <P>July 23, 2002</P></FONT><B><FONT face=3D"Times New Roman" size=3D5> <P>A View Of The Market</P></B></FONT><I><FONT face=3D"Times New Roman"> <P>Some Recent Questions From Clients:</P> <P>Do you expect to see a capitulation by investors before this decline=20 ends?</P></I></FONT><FONT face=3D"Times New Roman"> <P>The prospect of capitulation, or a climatic downward trading spike = that=20 exhausts the selling,</P> <P>appears to be very much on the minds of many, particularly the = financial=20 press. The "need" for this</P> <P>has been mentioned in numerous articles.</P> <P>First of all, nobody knows for sure if this event will occur. We have = clearly=20 seen an</P> <P>acceleration of selling in the last two weeks that has moved the = market to an=20 extreme extended or</P> <P>"oversold" position. In this regard, 99% of the stocks in the S&P = 500=20 (SPX =96 820) are below their</P> <P>ten-week average, a higher percentage than September 2001 or October = 1987.=20 Furthermore, actions</P> <P>reflecting investor sentiment such as the CBOE Put/Call Ratio, the = ten-day=20 average of the Arms</P> <P>Index (TRIN =96 1.67) and the NASDAQ Trin (TRINNASD =96 0.62), = measures of buying=20 and selling</P> <P>pressure on the market, and my proprietary "Diaper Indicator" all are = at or=20 near historically extreme</P> <P>levels, as is the CBOE OEX Volatility Index (VIX =96 48.23). = Furthermore, NYSE=20 short interest is</P> <P>now the highest in history and the dividend yield on the S&P 500 = is=20 higher than that of six-month</P> <P>U.S. Treasury bills, a most unusual event in modern times.</P> <P>My point is that one might say we have already had a "capitulation." = I would=20 also note that</P> <P>the 1973-1974 bear market, the worst I ever saw, ended on October 3, = 1974=20 with a "whimper, not a</P> <P>bang" after twenty-one months of slow death on low volume=85there was = no=20 capitulation. In</P> <P>addition, the 1929-1932 bear market bottomed on July 8, 1932 on = volume well=20 below many days in</P> <P>the prior two months. Who knows? =85 my personal view is that = investor=20 capitulation is not</P> <P>"needed" to form a bottom and that many sentiment indicators are at = more=20 extreme levels than at</P> <P>previous historic lows.</P></FONT></DIV> <BLOCKQUOTE dir=3Dltr=20 style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; = BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px"> <DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV> <DIV=20 style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: = black"><B>From:</B>=20 <A title=3Djlobatto@nyc.rr.com href=3D"mailto:jlobatto@nyc.rr.com">J. = Lobatto</A>=20 </DIV> <DIV style=3D"FONT: 10pt arial"><B>To:</B> <A = title=3Dcanslim@lists.xmission.com=20 = href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>= </DIV> <DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Tuesday, July 23, 2002 = 2:59=20 PM</DIV> <DIV style=3D"FONT: 10pt arial"><B>Subject:</B> [CANSLIM] Market=20 psychology</DIV> <DIV><BR></DIV> <DIV><FONT face=3DArial color=3D#0000ff>All the professionals are = looking for a=20 massive capitulation day to mark the termination of this bear market = (i.e. an=20 obvious panic day when they can start pouring money in). Using = the fact=20 that the market rarely satisfies the majority of participants, I = suspect that=20 the professionals may not get their wish. As such, one other scenario = comes to=20 mind:</FONT></DIV> <DIV><FONT face=3DArial color=3D#0000ff></FONT> </DIV> <DIV><FONT face=3DArial color=3D#0000ff>The market continues this = relentless water=20 torture for an indeterminate amount of time and finally the bear = market=20 ends at some point with a whimper barely noticed by anyone, that is a = new low=20 is made on a fairly</FONT><FONT face=3DArial color=3D#0000ff> "normal" = day and the=20 market starts climbing back up the next day, either = A) explosively=20 or perhaps B) gently and imperceptibly and basically doesn't look = back=20 from that day on.</FONT></DIV> <DIV><FONT face=3DArial color=3D#0000ff></FONT> </DIV> <DIV><FONT face=3DArial color=3D#0000ff>Any other non-capitulation = scenarios that=20 any of you can come up with? The reason I ask is that with my = "B"scenario, we=20 may not get the FTD day that will ring the bell for us = either.</FONT></DIV> <DIV><FONT face=3DArial color=3D#0000ff></FONT> </DIV> <DIV><FONT face=3DArial = color=3D#0000ff>Jon</FONT></DIV></BLOCKQUOTE></BODY></HTML> - ------=_NextPart_000_00DD_01C2325B.351CFC60-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email.
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