Borrowed from the SI AMAT thread, note the bold part:
Monday Technical Commentary
Ralph Acampora Managing Director, Global Equity Research 10/7/2002 10:10:05 AM
Today I wanted to start where I left off last Monday and compare today's market with a couple of previous markets.
In 1974, the S&P 500 formed a double bottom, with the second bottom being a higher bottom. This bottom was accompanied by a crossover on the momentum chart, which eventually led to a breakout on the index. Also notice the bottom formed in 1998. Again we had a double bottom, a crossover on the momentum chart, and a breakout on the chart, thus putting the bull market back in effect. Today's market is not giving us the signs we need to see to support a bottom. Last Friday the S&P 500 came down and while it did not close below the intra-day low, we have yet to see a crossover on the momentum chart.
Hopefully in the next couple of days we will see this momentum shift. I don't think this will happen, but this is what we need to have happen in order to secure a double bottom. If you look at the COMP, the NDX, the SOX, the Russell 2000, none of these indexes are showing any signs of a double bottom. Now if you look at the Russell 2000, last September we were very oversold. Off this oversold level we were able to obtain a seven-month rally. If you look at the most recent bottom of the Russell 2000, we were only able to achieve a five-week rally before rolling over and moving to a lower low.
You are also seeing this in individual stocks. For example, take a look at Intel (INTC-$17.31-Buy). In my opinion, this stock is going the way of Sun Microsystems (SUNW-$2.42-Buy) to the $2.00 to $4.00 range. Also, look at Centex Construction (CXP-$36.60-NR). Everyone is talking about a housing boom. We'll forget about the boom. Stocks in this group are starting to roll over. You also heard our Chief Strategist tell us you cannot have a bull market without the financials. Well, if you look at Morgan Stanley Dean Witter (MWD-$31.03-BUY) or Fannie Mae (FNM-$63.15-BUY), these stocks are in the mist of major breakdown. The bottom line is that 75% of the S&P 500 groups are either below their July lows or within 10% of their lows, so the picture is not very good. I also went through the 30 Dow stocks to try and get some kind of target. On the upside you could possibly see at most a rally to the 8900 area. On the down side you could very easily see an initial move to 6500 and then potentially 5500.
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