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[RT] ralph blook comenrary



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<A class=you id=youfirst 
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Ralph 
Bloch&#8217;s Weekly Commentary
Ralph Bloch&#8217;s Weekly Commentary is released each 
Thursday. Last updated Thursday, September 27, 2001.
LENGTHY BOTTOMING PROCESS
Last week's conclusion: 

  There is little doubt in my mind that we have seen a massive amount of 
  capitulation this week. At its worst Wednesday, the DJI had fallen over 1100 
  points this week!! Wednesday saw a violent rally after another ê shock wave, 
  and we like dramatic activity accompanied by high volume. Wednesday was the 
  second day this week where NYSE volume was above 2 billion, with Monday 
  posting an all-time high. What is also seen in a market about ready to post at 
  least a good rally is high levels of bearish sentiment. 1) The VIX index has 
  had highs of 47.7 on Monday - 46.67 on Tuesday and 47.62 Wednesday. Three very 
  high readings, which have, in the past, been a precursor to at least good 
  rallies, if not a low. 2) The oversold level reached a monster minus 12.1 - I 
  can't remember the last time it was that deeply oversold. 10/19/87 is probably 
  that time. 3) The I.I. figures showed the bearish camp above the bulls (35.7% 
  bulls and 37.6% bears) for the first time since the September-October period 
  of 1998. That was the bottom of that bear market. Having outlined all of the 
  above, I must say that there is such uncertainty - what President Bush does to 
  those evil 'things', more huge airline layoffs, etc. Futures, as of 6:00 a.m., 
  point to a lower opening, which gives the market another chance to go out 
  really plus. Frankly, I'd wait for a good close. If the market can do it 
  right, there'll be plenty of time to play.
The I.I. figures improved, and I tell you that there is usually a one-two 
week lag in reporting this data. So, next week will be the first time that it 
will show response to the 14-1/4% drop. I'd love to see bulls below 30% and 
bears over 50% or real close to that level.


  
  
     
    
      This Week
    
      Last Week
  
    
      Bulls
    
      33.7%
    
      35.7%
  
    
      Bears
    
      42.1%
    
      37.6%
  
    
      Correction
    
      24.2%
    
      26.7%
Monday: 9/24
Well, well, the elongated capitulation phase finally led to a strong rally. 
The DJI was up 280 at the opening and then, as we wanted, added to the gains by 
getting over 400 points before closing up 368 points. NASDAQ traded in similar 
fashion with a plus 76 finish. The Advance-Decline index was strong all day with 
final readings showing 1605 net advances. In other words, the internals were 
strong. No doubt in my mind that short-covering was a significant part of 
Monday's equation. Also, the week's oversold level diminished from minus 17.0 to 
15.9, and we believe that the 17.0 reading will prove to be the peak for this 
cycle. An example, I think, of short-covering at work was TXN. It was 20.10 at 
its low on Friday, and it was nearly 26 Monday - better than a 25% gain!! Other 
big winners were BA, GE, IBM, UTX, MMM. First, let me suggest that before we can 
be more comfortable that a final bottom is in place, we have to do it all over 
again. By that I mean we need to see a low (Friday?) - rally - retest. The 
retest has to produce some positive non-confirmations the way we saw in 
March-April. The missing ingredient back then, with benefit of 20/20 hindsight, 
was the lack of a period of base-building. For example, in 1987, the low was on 
10/19/87, which was followed by a sharp rally - a period of lateral trading and 
then a successful retest in December. There was a two-month base. In 1990-1991 
(Gulf war), the DJI bottomed in October and formed an inverse "H&S" pattern 
and broke out the day the war started in 1/91 - nearly a three-month base. This 
is what we didn't have earlier this year, and it's what I missed! A lower 
opening is a better way this morning - that ought to lead to further rally 
tries.
Tuesday: 9/25
It's hard to believe, but we just saw two plus days in-a-row. What was of 
interest was that there were several swings that went from up 91 at 10:15 a.m. 
to down 80 at 2:00 p.m. There were a couple of smaller swings that led to a 
close of up 56 for the DJI and up 2 for NASDAQ. Breadth held nicely in positive 
territory all day, even when it went minus, and ended with 609 net advances. A 
couple of losers were MRK and GM. The Puts-Calls ratio was benign with readings 
of 120% at noon and 117% at the bell - I wouldn't expect anything different 
after Monday's big upper!! The oversold level fell a bit to 14.9 vs 15.9, and 
the minus 17.0 does appear to have been the peak. Good winners were BA, PG, SBC, 
UTX, WMT. There isn't any evidence that the final low is in place - it may well 
be, but I can't bet the ranch just yet!! At a minimum, we need to see the market 
continue to rally - 9000 or so would be a big help. Then we need the 
near-inevitable retest that produces some positive non-confirmations - more on 
this as it unfolds. If that plays out, then it would be necessary to see a 
period of base-building similar to October-December 1987 and October-January 
1990-1991. If so, then odds would strongly suggest that the final lows would be 
in place. All of this will obviously take time.
Wednesday: 9/26
Plus openings of 58 and 15 by the DJI and NASDAQ, respectively, led to 
selling that carried the DJI to down over 120, with a close of down 92. NASDAQ 
followed with a down finish of 37 points. "Reasons" were, for a change, very 
visible. Numbers were lowered for IBM and a downgrade for MU sent these stocks 
reeling with loses of 3-1/3 and 4, respectively. This cast a real pall over the 
entire market after two plus days. The internals were good with the 
Advance-Decline index showing good signs of relative strength as it posted only 
144 net declines - much better than the DJI. This is what we want to see on down 
sessions when we're struggling for a bottom. This will, I'm afraid, continue for 
a while. For the first time in a while, the Puts-Calls ratio jumped early, but 
faded. It was 224% at 11:00 a.m., 243% at noon and 141% at the bell. 
Conclusion:
Remember that tomorrow is the last day of the quarter, today is a Jewish 
holiday, and volume will be less than usual. GS lowered its rating on INTC, etc. 
etc. A lower opening is preferable, as it then might attract some buyers. A big 
help would be for the cracked semis to start to stabilize - a long process 
before they head higher in a meaningful manner. Volatility will continue as the 
USA continues to deal with recent events.

  
  
    
      Ralph BlochSenior Vice President
The opinions offered by Mr. Bloch should be considered a part of your overall 
decision-making process. For more information about this report &#8211; to discuss how 
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securities, markets or developments herein. All expressions of opinion reflect 
the judgment of the firm at the date published and are subject to change. 
Information has been obtained from sources considered reliable, but we do not 
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Associates, Inc., its affiliates, officers, directors, employees and/or agents 
may have or may in the future, execute transactions in the securities mentioned 
in this report, which transactions may not be consistent with this report's 
conclusions. 
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