NASDAQ DOUBLE - A CLASSIC BUYING CLIMAX
Before looking at the DJI, see how much the speculative Internet bubble had
lifted the NASDAQ. From its August low of 2400, the NASDAQ reached 5000
in February. Doubles off an extremely oversold bear market low can be bullish.
But after a long advance that began in 1982, this had be cosnidered a buying climax.
What could the stock market possibly do for an encore?
The DJI's peak in January occurred 4 months before the NASDAQ's, so heavy
was the speculation in internet stocks. Down days invariably had higher volume than up-
days after the start of the new year. The A/D Line would not rally. Heavy distribution
was seen in the Accumulation Index. I remembering wondering as the year began
what it was that was holding market up, except the over-riding speculation in internet
and biotech stocks.
In retrospect, we can see that the best hope for the market in 2000 was that
it was a Presidential Election year, when the DJIA usually enters a trading range,
and the market tends to be on better behavior, so as not to become a political issue
itself. At the time, you had to go back to 1960 to see a bear market in a Presidential
Election year. The FED finally decided for political reasons, to stop the Democrats
from winning again, to start raising the Discount Rate just before the year of the
election where their monetary power would have most political power. (So much
for an apolitical FED?! How it not be?)
Date Discount Rate
-------------- ---------------
2/2/2000 5.25%
3/21/2000 5.5%
5/16/2000 6.0%
