Grizzly's Growlings Current Report

Monday Morning Market Musings    10/02/2000

Bobbing for Apples?

As CNNfn characterized it, September was “a month to forget.”

October should be a month to remember.

CNBC was even less enthusiastic about September: “Stocks end lousy month with a thud. “ For the month, the DJIA lost 5 percent and the NASDAQ tumbled 12 percent.

As we said in our last report on September 5th (Market Crash Dead Ahead?),

The Elliott Wave labels … paint a pretty clear picture: the DJIA is approaching the top of the a-b-c wave 2 counter-trend rally. There may be a few more days or even weeks of squiggles higher to complete the details of wave C of 2, so we'll just have to ride out any short-term rallies.

Once the wave 2 pattern is complete, the DJIA should begin the relentless wave 3 we've been anticipating. This move should include an historic crash day, probably in mid-October.

The DJIA capped its counter-trend wave 2 rally one day later at 11,500. Since then, the initial stages of wave 3 have been unfolding. So far, it appears that subwave 1 down is in place and counter-trend subwave 2 is nearing completion. 

Again, there may be a few more days of squiggles higher to complete the details of subwave 2, so we'll just have to ride out any short-term rallies. 

What lies directly ahead should be the devastating "third of a third" wave crash, probably some time in the middle of the month.

The American Association of Individual Investor’s market sentiment survey in September reported only 9% bears, the lowest reading since the last week August 1987, which of course marked the top before the Crash of ’87.

Combine weak corporate earnings, higher energy prices, the lowest U.S. savings rate on record, the Euro crisis, fear of a high-tax high-regulatory Gore administration and the very bearish Elliott Wave setup, you have the makings of a Crash.

US STOCKS REMAIN ON FULL CRASH ALERT!

For aggressive speculators, any short-term strength in the markets hold excellent low-risk entry points to the short side.

For longer-term investors, you may want to have a look at one or more of the mutual funds well-positioned for the down side. Please see our Great Bear Funds Page.

Please also read our disclaimer.

We’ll keep you up-to-date with interim market reports as the Crash of 2000 unfolds.

As we’ve said throughout 2000, in bear markets the lion's share of surprises are to the downside. Last Friday’s (09/29) market action typifies the state of the markets. Apple Computers [AAPL] was sliced and diced to the core on “earnings disappointment.” The stock fell 51 percent Friday after announcing its fourth quarter earnings would come in about one-third less than expected. 

Intel [INTC] also got blasted last week, losing 31 percent on its own earnings disappointment.

For a time, InterneTulip mania poster child TheGlobe.Com [TGLO] held the distinction of having the largest one-day IPO gain in history. On November 13, 1998 the stock opened at $4.50 and quickly zoomed off the charts to $48.50 -- up 978% -- before closing the day at $31.75. (Prices adjusted for a subsequent stock split.)

TGLO now holds the unofficial record for having nose-dived the fastest and farther of any “successful” IPO. In less than two years, the stock has shriveled some 99% from its IPO peak and is now scraping the floor at around 15/32nds.

TGLO is, or should we say was, a builder of Internet communities. TGLO is no longer glowing. According to the company, it will report about a 36 cents a share loss. Not good for a stock trading just a few ticks higher than 36 cents a share!

The presidential elections are just four weeks away and the race is too close to call. We think the markets’ action in October will play a significant role in deciding the outcome. If the markets get “Gored” in October, as we expect, then Bush will win. If the markets somehow manage to “beat around the Bush” of the Crash, then Gore should be victorious. 

If the markets do crash, then all social, political and economic bets in America are off, and whomever is elected may later demand a recount.

"October is one of the peculiarly dangerous months to speculate in stocks. The others are January, September, April, November, May, March, June, December, August, and, February."
                                              -- Mark Twain, 1894

grizzly@bearmarketcentral.com

Please read the disclaimer.

Grizzly's Growlings' Archives