OPENING POSITION
April 2003
The first quarter of 2003 is just about
over, and so far, we haven't seen any signs of improvement in the economy.
What we have seen, however, are further intensification of geopolitical
tensions, terrorism alerts, an unfavorable economic stimulus package, and
to add to that, a devastating tragedy in manned space travel. Does all
this add up to another negative year for the markets?
We'd better get used to the idea of a long visit from the bear. Like
others, I have been keeping an eye on the Dow Jones Industrial Average
(DJIA), especially on the 7400-7500 key support level. As of this writing,
that level seems to be holding strong. But how long are prices going to
keep bouncing off this support? Clearly, the DJIA could drop to levels
well below 7400. I don't mean to be pessimistic, but I would really like
to see the DJIA fall to at least 5300 before even expecting to see a meaningful
rally.
Steve Nison, in the STOCKS & COMMODITIES
interview this month, makes a comment about the head & shoulders formation
in the Standard & Poor's 500. He states that at present, the S&P
500 is in a broad trading range. Whether or not prices break below this
range, he doesn't expect to see a rally in the markets until prices finally
break out above it. The interview starts on page 68.
On page 40, Thomas Bulkowski starts out
his article "Bullish Chart Patterns" by saying, "One day,
the market will find a bottom and start building a base from which to launch
another bull market. Will your trading missiles be ready?" He discusses
several bullish chart patterns you should familiarize yourself with and
look forward to seeing on your charts. You wouldn't want to miss out on
any opportunities when securities finally do break out from their basing
patterns. You can also try out the finite volume elements indicator, developed
by Markos Katsanos in his article "Detecting Breakouts," which
starts on page 27. This indicator is designed to identify those stocks
that are breaking out of a basing pattern.
But before seeing these basing patterns, the markets will need to find
a bottom. We'll see one sooner or later - but in the meantime, the best
thing for you to do is respond to the markets. The quicker all the negativity
gets put on the back burner, the sooner the turnaround will arrive - and
that's something I'm sure everybody is looking forward to.
Jayanthi Gopalakrishnan,
Editor
Originally published in the April 2003 issue of Technical Analysis
of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright
2003, Technical Analysis, Inc.
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