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FINANCIAL POST
MARKET EYE
March 23, 2001
William Hanley
whanley@nationalpost.com
Joe Blow, meet Houdini.
Does great escape signal the low in the bear market?
Watching
the show put on by Wall Street yesterday, we were reminded of a classic
New Yorker cartoon from the 1970s: Joe Blow, his hair on end, is taking in
the evening news as the anchor announces that the Dow Jones industrial
average fell to zero today before recovering in late trade.
Harry
Houdini himself would have been proud of the stock market's escape routine
yesterday as the Dow fell 381 points to 9106.54 before recovering
miraculously to being down just 32 points, only to close off 97 at
9389.48. The Toronto Stock Exchange 300 composite index dropped more than
200 points and ended up slightly in positive territory.
Wondering
at the sheer madness of it all, Joe Blow is left to ponder the Big
Questions: Was that 9106.54 on the Dow the low in the bear market of
2000-01? Did the Street, led by the institutions, finally cave in
completely intraday, throwing in the towel in a final hopeless act that
could mark the bottom of the market? Did Joe Blow do the right thing by
holding in these past weeks and refusing to sell, even as most of the
buy-and-hold counsellors on the Street were clearly selling every little
rally?
We
have to tell Joe Blow: There will be no announcement when the low is put
in. We will know only in the fullness of time, quite well after the event,
that that was it -- the low of the bear market, which officially claimed
the Dow Jones industrial average among its victims on March 22, 2001. A
date will go into the record books and people will say: "Well, of
course, that's when the low was made. It was easy to see. We should have
known."
If
yesterday's low turns out to be the turning point for equity prices, it
would be neat, a piece of market poetry no less: the stock market making a
low on the very day the Dow happens to reach the official 20% bear market
threshold from the high.
Other
people point hopefully to the fact that the Nasdaq composite index held in
well and finished with a winning flourish yesterday on the surprising
strength of the chip stocks as the broader indexes dropped through more
technical support levels; that Nortel Networks Corp. and other big
technology stocks stood their ground and ended with impressive gains.
Could this maniacal index be signalling the end to the year-long nightmare
is nigh or actually here?
The
problem is that the Nasdaq is already off 65% and Nortel 75%, having had
their very own crashes. The bad news about the techs gaining when the Old
Economy stocks are struggling is that the rotation out of techs into
so-called value stocks could be beginning to be reversed. That could spell
rougher times for those who have been holding the old line stocks.
Meantime,
while even the remaining bulls would be hard-pressed to call yesterday's
low "it," there's lots of speculation -- to coin a phrase --
that this could be the beginning of a "tradeable rally" in which
nimble traders could ride stocks up for a while before bailing out with a
profit.
Certainly,
yesterday's Houdini move was a tradeable rally for those who called it
right and bailed out with tidy profits minutes before the close.
Even
our old gloomster friend Bob Hoye
and his colleagues at Vancouver's Institutional Advisors advisory
service detect a good tradeable rally developing some time before
mid-April. And this could be it.
The
bad news is that Hoye
& Co., who have been quite accurate with their downbeat
predictions, are unwavering in their view that the any concerted move up
in stocks would be a rally in a continuing bear market.
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