© July 30, 2002
INTERIM REPORT
The bear-market rally came later than
originally expected, but it has been a classic
sharp leap. In just 5 trading days, the stock
market has jumped about 15% on average.
As you can see by the chart, the S&P has
traced out a clear 5-3-5 zigzag rally. From
the compressed low of July 24, the Dow
gained 16%, the S&P 18% and the
NASDAQ 13.5%. Speculators should move
back to 200% short now. Investors should
stay safely in cash.
Regardless of what you read and hear
in the media, the bear market is not over.
The popular VIX and the TRIN are hooks
because this bear market will continue to
wipe out momentum indicators’ old “benchmarks.” Only the sentiment indicators are
useful, and currently, they do not call for a
major low.
925
900
A COMPLETED
BEAR-MARKET RALLY
S&P 500
C
0
8
30-minute
9
875
A
850
0b
8
825
9
6
a
6
7
c
800
775
7
B
© July 2002 Elliott Wave International
7/19/02 7/22/02 7/23/02 7/24/02 7/25/02 7/26/02 7/29/02 7/30/02
This rally could develop into a double zigzag, with a pullback now and then a second A-B-C rise
ending a week or so from now. As EWFF explained, the maximum upside potential appears to be 950 on the
S&P and about 9000 on the Dow. But given the fact that the front pages of countless newspapers have
trumpeted “the bottom,” I prefer to re-establish aggressive shorts at the first opportunity, and this is it. Think
about it. When was the last time that the front pages of national newspapers correctly announced a major
bear-market low? Bullish investors were pleading for a rally to sell on, and they got it. But they don’t want
to sell now because the chorus in the media says it’s a bottom. If we are fortunate, we will be buying stocks
from them at lower prices when panic forces them out.
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