Everyone I know keeps saying that we will not go down to the September lows again (or lower). Why not? Seems almost a sure thing since no one believes it .........the perfect trap!!! (February 9, 2002)

  That is usually the case isn't it? It is often the case that when everyone decides something has to be, it never comes about. Now I can give you some reasons why I do not think it will head back down to the lows (at least not all of the indexes), but as investors, all we can really do is listen to what the market is telling us. The economy keeps improving, but as I have been saying, the quality of the recovery is in question, and as long as that is up in the air the indexes could just continue to slide on back to that level. Or, one or two of the major indexes could fully test the lows while the other holds up above that level.

The reason I don't think all of the indexes will fall all the way to the lows is that the economy is improving now while back in September it was still trying to bottom. Then the attack came and torpedoed what was looking to be the bottom; the day before the attack we wrote that we were looking for the market to start a rebound. The fact that the market was trying to turn at that point on some signs of improving economics is one reason I think the indexes could head toward the pre 9-11 lows (on the Nasdaq that was right at 1670 to 1700) and then rally from there. Before that is the 50% retracement at 1743; as we have said before, that is a rule of thumb and not a hard and fast level.

Again, however, despite all of the theory, we just have to look at what the market is showing; right now that is a downtrend from the January high after some pretty serious distribution. Until it changes its character with a follow through to a rally attempt and some leading stocks shooting higher, the bias is downside.

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