Commentary (for the week ending December 6, 2002)
The market finally broke its winning streak this week, as the major
indices closed the week sharply lower . For the week, the Nasdaq lost 3.81%, while the Dow
dropped 2.81%, and the S&P100 fell 3.01%.
This was a very poor week for us at Equity Research Partners
as we finally positioned ourselves for a bull run, only to be trampled as
the market pulled back.
Looking forward, this week's pull back relieved some of the over-bought
tension in the market, thereby making continued gains easier. However, in
the two previous post-September 11 rallies (those that broke through the
long-term down trend lines), the rallies suddenly failed and prices collapsed
to new lows. That makes the coming week very important. If the market
should continue down this week, it could significantly undermine the
market's confidence in the validity of current prices. That would likely
spark additional selling, which would put the bear firmly back in the
drivers seat. In contrast, any upward movement or sustained sideways
movement will allow the rally and current market prices to gain more
credibility, thereby supporting further upward movement through the end of
the year.
So, the odds for this coming week are in favor of sideways movement or
a mild increase. However, any big action is more likely to be on the
downside, rather than the upside, which makes the coming week a good one
to hedge your bets.
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