JPMorgan (JPM) has broken out to new highs this week, but sits near a perilous technical level, writ...
From the Bear Cave
04/04/2003 12:00 am EST
Robert Prechter, along with his colleagues Peter Kendall and Steve Hochberg are among the world's leading authorities on a rather esoteric technical field - Elliott Wave Theory. This overriding theory combines socio-economics with financial market forecasts by combining traditional technical indicators with Elliott Wave theory, fractal analysis, Fibonacci numbers, and a host of technically sophisticated methods.
“The wave two rally in the Dow has so far retraced 50% of the previous December to March decline, which is fairly normal in bear markets. The technical aspects of the rally are exceedingly weak. Put-to-call ratios are low, the ARMS index is low, breadth is narrow, news has given people an excuse to buy , and volume has receded since March 13. It’s quite a list, but that’s not all.
“The tick reading has surpassed +1000 for eight days in a row, which is a record string of consecutive daily buying panics. The only other times that this indicator has come close to matching this string were two periods ending in November 2002 and January 2003. The first period led to a high that has not yet been exceeded. The second ended right at the top prior to a relentless sell off. The fact that these daily buying panics have been unable to generate decent advance-decline statistics or rising volume is remarkable and bearish.
“While this rally could carry a
bit further before topping, the probability that this rally is the kickoff to
a new bull market, as so many are saying, is virtually zero. More likely, it’s a
hair’s breadth away from its peak. In retrospect, this rally will probably be
described as having been the very last opportunity for bulls to have gotten out
of their positions before the worst of the devastation sets in. If you are a
conservative investor, hold tight to safe cash equivalents. If you are a
speculator, stay 200% short an remain patient. The best years for the bears are
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