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Acampora: Pre-War Jitters

01/31/2003 12:00 am EST


Ralph Acampora

Director of Technical Research, Altaira, Ltd.

Ralph Acampora  is among the financial world's most respected technical analysts. In a special report entitled Pre-War Jitters, the director of Technical Analysis for Prudential Securities offers an intriguing comparison between market activity today and the days leading into the Gulf War in 1991. Here's his current outlook.

"We would like to highlight a comparison of recent market trading with the days leading up to the Gulf War in 1991. Note the chart of the Dow Jones Industrial average for the period immediately before the Gulf War and a few months after. There are several similarities: First, the enemy is the same—Iraq. Second, the market made its pre-war low in October. Third, there was a noticeable rally from October to December. And fourth, the December peak led into a scary pre-war decline that lasted eight trading days.

"The percentage moves during the pre-war rally and the scary pre-war decline are not exactly the same as today’s moves but they do provide us with a sense of the volatility that surrounded this nervous period. Once the enemy is confronted (either militarily or if they decide to leave peacefully) we should experience an exuberant rally. The extent and duration of that potential rally depends upon the ability to remove the old Iraqi regime with limited damage to us and to our allies. In the meantime, we believe that the recent breakdowns are a harbinger of further near term weakness but, like the pre-Gulf War market, we do not expect new lows. For those who are very short term oriented this could be a difficult period. But for those who are longer term oriented, this should be used as a buying opportunity."


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