Chart created using GET End-of-Day

We could easily be bearish on the Nasdaq Composite chart pictured on the right above. The Fibonacci rhythm of this chart suggests at least one more plunge to new lows toward 2,883. The problem is that we are somewhat stultified by the chart on the left of the old Value Line Index -- a multi-month coil pattern that appears to be breaking to the topside, but taking its sweet time getting on with it. On a closer examination (on the daily chart below), the Value Line pattern has already experienced one false break up and one false break down out of this pattern. It's next move should be a real one. The recent impulsive 5-wave rally is encouraging for the bulls, and a high close for the month would certainly tip the scales that this little watched index is going north.

Chart created using GET End-of-Day

So if we seem particularly quiet in our prognostications late this summer, it is because we are carefully watching these two very diffrent looking pictures of the monthly Value Line and the weekly Nasdaq. Could it be that the former will break up and the latter will break down? Two years ago we would have said that the correlation between all the different indices is too high to allow that to happen. Given all the dispersions of price behavior to date in 1999-2000, however, we are not so sure. Maybe a rotation out of high profile names like Intel, Cisco, and Micron and into small cap names would allow this to happen. If it does, the result will be dizzying and confusing for even the most sophisticated investors out there.

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Sand Spring Advisors provides information and analysis from sources and using methods it believes reliable, but cannot accept responsibility for any trading losses that may be incurred as a result of our analysis. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities, and should always trade at a position size level well within their financial condition. Principals of Sand Spring Advisors may carry positions in securities or futures discussed, but as a matter of policy will always so disclose this if it is the case, and will specifically not trade in any described security or futures for a period 5 business days prior to or subsequent to a commentary being released on a given security or futures.