Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] Market psychology
Date: Tue, 23 Jul 2002 15:44:09 -0500
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Interesting perspective, isn't it Jon?
While history doesn't always repeat verbatim, little changes in human =
behavior. I think those two significant Bears ended once everybody was =
bored to tears with the market. What is the saying?.... "sometimes the =
Market just wears you out...." :)) Add that to Bill K's comment about =
needing several months to find a bottom and you've got the makings of =
new Market "potential."
Katherine
----- Original Message -----=20
From: J. Lobatto=20
To: canslim@lists.xmission.com=20
Sent: Tuesday, July 23, 2002 3:14 PM
Subject: Re: [CANSLIM] Market psychology
Katherine,
Thanks for that reply. Very interesting to note that the two most =
sustained bears of the century did not end on obvious capitulation.
Jon=20
----- Original Message -----=20
From: Katherine Malm=20
To: canslim@lists.xmission.com=20
Sent: Tuesday, July 23, 2002 4:11 PM
Subject: Re: [CANSLIM] Market psychology
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
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<DIV>Interesting perspective, isn't it Jon?</DIV>
<DIV> </DIV>
<DIV>While history doesn't always repeat verbatim, little changes in =
human=20
behavior. I think those two significant Bears ended once =
everybody was=20
bored to tears with the market. What is the saying?.... "sometimes the =
Market=20
just wears you out...." :)) Add that to Bill K's comment about needing =
several=20
months to find a bottom and you've got the makings of new Market=20
"potential."</DIV>
<DIV> </DIV>
<DIV>Katherine</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 =
3:14=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] Market=20
psychology</DIV>
<DIV><BR></DIV>
<DIV><FONT face=3DArial color=3D#0000ff>Katherine,</FONT></DIV>
<DIV><FONT face=3DArial color=3D#0000ff></FONT> </DIV>
<DIV><FONT face=3DArial color=3D#0000ff>Thanks for that reply. Very =
interesting to=20
note that the two most sustained bears of the century did not end on =
obvious=20
capitulation.</FONT></DIV>
<DIV><FONT face=3DArial color=3D#0000ff></FONT> </DIV>
<DIV><FONT face=3DArial color=3D#0000ff>Jon</FONT> </DIV>
<BLOCKQUOTE dir=3Dltr=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #0000ff 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=3Dkmalm@earthlink.net =
href=3D"mailto:kmalm@earthlink.net">Katherine=20
Malm</A> </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>=
=20
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Tuesday, July 23, 2002 =
4:11=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] Market =
psychology</DIV>
<DIV><BR></DIV>
<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=20
the market will find its bottom, and it's very possible that we may =
get some=20
"false" FTD's. But I do know with certainty that there will be no=20
sustainable upturn *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=20
clearly seen an</P>
<P>acceleration of selling in the last two weeks that has moved the =
market=20
to an 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=20
1987. Furthermore, actions</P>
<P>reflecting investor sentiment such as the CBOE Put/Call Ratio, =
the=20
ten-day average of the Arms</P>
<P>Index (TRIN =96 1.67) and the NASDAQ Trin (TRINNASD =96 0.62), =
measures of=20
buying and selling</P>
<P>pressure on the market, and my proprietary "Diaper Indicator" all =
are at=20
or near historically extreme</P>
<P>levels, as is the CBOE OEX Volatility Index (VIX =96 48.23). =
Furthermore,=20
NYSE 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=20
would 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=20
well 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.=20
Lobatto</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A=20
title=3Dcanslim@lists.xmission.com=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
=20
</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=20
a massive capitulation day to mark the termination of this bear =
market=20
(i.e. an obvious panic day when they can start pouring money =
in).=20
Using the fact that the market rarely satisfies the majority of=20
participants, I suspect that the professionals may not get their =
wish. As=20
such, one other scenario comes to mind:</FONT></DIV>
<DIV><FONT face=3DArial color=3D#0000ff></FONT> </DIV>
<DIV><FONT face=3DArial color=3D#0000ff>The market continues this =
relentless=20
water torture for an indeterminate amount of time and finally =
the=20
bear market ends at some point with a whimper barely noticed by =
anyone,=20
that is a new low is made on a fairly</FONT><FONT face=3DArial=20
color=3D#0000ff> "normal" day and the market starts climbing =
back up=20
the next day, either A) explosively or perhaps B) gently and=20
imperceptibly and basically doesn't look back from that day=20
on.</FONT></DIV>
<DIV><FONT face=3DArial color=3D#0000ff></FONT> </DIV>
<DIV><FONT face=3DArial color=3D#0000ff>Any other non-capitulation =
scenarios=20
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=20
either.</FONT></DIV>
<DIV><FONT face=3DArial color=3D#0000ff></FONT> </DIV>
<DIV><FONT face=3DArial=20
color=3D#0000ff>Jon</FONT></DIV></BLOCKQUOTE></BLOCKQUOTE></BLOCKQUOTE></=
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