Summary
While the S&P 500 did close below 1,100 yesterday, the DJIA and the
NASDAQ Composite held their respective psychologically key levels of 10,000 and
1,900. While a near-term bounce is probable, it is highly unlikely the stock
market's current down-leg is over.
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It was a little more than a year ago the market put in its March lows.
The ensuing rally was an exceptionally powerful one, as at the time I opined it
probably would be. At that time, my forecast was definitely out of the
mainstream, since many on Wall Street had thrown in the towel and were not only
talking about new cycle lows, but they were also predicting 2003 would mark the
fourth consecutive calendar year of market declines. Had this eroneous
prediction come to pass, it would have been the first such occurrence since the
1929-32 period.
Times change. The Street's most vociferous bulls are back with a
vengeance, showcased incessantly on CNBC and other such venues. Their market outlook
for the current year and beyond remains very upbeat.
Last year, in discussing the significant rally I thought was ahead, I was
careful to put it in the longer-term context I thought remained operative.
To wit: It would be a major cyclical event occurring within the overriding
environment of an ongoing secular bear market.
I continue to believe this, and I also continue to believe the secular
bear will reassert itself this year. How the timing configures is critical, of
course, in whether you wind up with an overall negative 2004, but, yes ... I
do think there's a decent chance this year will wind up in the red, despite all
the "Presidential cycle" and related hype.
Through yesterday's close, here's what my tracking group looked like from
respective highs and for the year to date.
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SELECTED STOCK-MARKET MEASURES -- RETURNS FROM
RECENT HIGHS AND FOR 2004 TO DATE THROUGH 03/22/04
(Ranked in Year-To-Date Order)
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To 03/22 From
Recent Highs 12/31 -------------
03/22 ------------ 2003 2004 12/31
Close Close Date Close Highs Close
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Russ. 2000 559 602 01/26 557 -7.1% +0.4%
Value Line 361 385 03/05 363 -6.2% -0.6%
NYSE Comp. 6404 6780 03/05 6464 -5.5% -0.9%
Wil. 5000 10698 11314 03/05 10800 -5.4% -0.9%
S&P 500 1095 1158 02/11 1112 -5.4% -1.5%
DJIA 10065 10738 02/11 10454 -6.3% -3.7%
NASDAQ 100 1381 1554 01/26 1468 -11.1% -5.9%
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Average -6.7% -1.9%
Median -6.2% -0.9%
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As noted earlier, some key psychological levels survived yesterday's
decline. The DJIA held 10,000, and the NASDAQ Composite held 1,900. At its
intraday low of 1898, the NAZ came close to touching its 200-day moving average.
And in the immediate future, it is likely respective 200-day moving
averages that represent cogent targets. My guess would be that these will hold,
give or take a little, during their first test. This would then set up a pretty
decent reflex rally. Longer run, however, I think material breaches of this
critical technical measure are the probable outcome.
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DJIA, NASDAQ COMPOSITE AND S&P 500 CLOSING
PRICES ON SELECTED DATES VERSUS RESPECTIVE
20-DAY, 50-DAY AND 200-DAY MOVING AVERAGES
(In Percent or Portion Thereof)
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DJIA Vs. NAZ Comp. Vs. S&P 500 Vs.
------------- ------------- -------------
Date 20D 50D 200D 20D 50D 200D 20D 50D 200D
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2004
03/22 -3 -4 3 -4 -7 1 -3 -4 4
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03/19 -2 -3 4 -3 -5 2 -2 -2 5
03/05-0.3 0.4 9 0 -0.6 10 0.8 2 11
02/20 0.2 1 10 -1 -0.6 10 0.2 2 10
02/06 0.5 2 11 -2 2 13 0.6 3 11
01/23 0.5 4 12 2 6 18 1 5 12
01/09 1 4 12 4 6 19 2 4 12
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2003
12/26 2 5 12 1 2 14 2 4 10
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2002
10/09 -7 -13 -23 -7 -12 -30 -7 -12 -24
07/16 NA -12 -14 NA -11 -22 NA -12 -18
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