This week marks the beginning of a new development in the on-going bear market and while it isn’t an announcement of the end of the bear market, it is remarkable nonetheless. While the Dow and the S&P continue to test new lows, the Nasdaq has begun to stabilize to some degree though it’s difficult to be certain that a durable bottom has been put in. Unfortunately, durable bottoms are only recognizable after so much time has passed. What we do notice is that the weekly chart for the Nasdaq has price ranges for the last two weeks whose lows are almost identical. Now this could be a small coincidence however, when looking at various charts such as CSCO, ORCL and DELL, we spot the beginnings of upward trends in their prices.

There is more than one possible reason for this price action. The first is that the market is very oversold and consequently, we could be witnessing a relief rally of sorts. The second possibility is the normal summer rally that occurs most years. The third possibility is that the Nasdaq has indeed found its legs and is now moving off of support levels.

As for the Dow and S&P, it looks more and more likely that the Dow will test its lows from September and in doing so, it is dragging down the S&P with it as well. Other market indexes such as the Midcap 400 and the Russell 2000 have also dropped considerably in the past few sessions. This divergence in market indexes will keep gains on the Nasdaq in check over the near term as downward pressure on equities belonging to other indexes spills over and prevents positive finishes in some Nasdaq-traded shares.

Pressure could also come this week from the release of earnings. This week marks the beginning of the 2^nd quarter earnings releases. Over the next 2 weeks, two-thirds of the S&P 500 will report their earnings and there is optimism in the air having measured a ratio of 1.3:1 negative to positive pre-announcements while a year ago, it was closer to 4:1.

Traders will also be looking for guidance on interest rates when Greenspan speaks to the Senate and the House of Representatives this week in his twice-annual trip to congress. He’ll discuss the US economy and when interest rate increases might commence.

Our Stock Picks

The stop losses of $7.80 on AOF and $11.20 on MUO are maintained.

New Buy Recommendations:

None. Our trade on CP, NSC, and YELL started out badly as the Dow transports was hit by selling. Since they haven’t broken through support lines, we keep them all and expect this week to recoup some of those early losses.

New Short Sales

None.

Stock Positions to Sell/Exit:

None.

List of Current Stock Recommendations:

Action Ratings. The following is the legend for designating immediate action
for our stock recommendations. The first is B, meaning the stock is timely
to buy but the case for doing so right here is not overwhelming. Either the
stock may have gotten ahead of itself and may be vulnerable to a retracement or
else the stock has been performing disappointingly but may simply be
regrouping. B+ and B++ indicate stocks for which there is a technical case
to buy now, with plusses adding weight according to how many there are, up
to a maximum of two. Stocks rated H are ones to hold, awaiting confirmation
to buy more or to sell. SELL, of course, means what it says. It seldom pays
to override this designation. In the case of stocks held short, the rating is S where positions should be retained. S+ and S++ indicate stocks for which there is a technical case to add to the positions with plusses adding weight similar to long positions. The maximum number of plus signs is 2.

Stocks marked # are eligible as Canadian content in Canadian RSP funds. Otherwise there is a 30 percent restriction on foreign stocks held in these accounts.

Date of Entry	Name	Symbol	Entry Price	Current Price	Action Rating
02/01/01	Acm Government Opportunity Fund	AOF	7.99	9.13	B+
07/08/02	CP #	CP	24.58	23.00	H
06/17/02	Friedman Billings Ramsey	FBR	10.75	11.08	B+
07/08/02	Norfolk Southern	NSC	23.70	21.47	H
02/01/01	Pioneer Interest Shares	MUO	11.95	11.84	H
07/08/02	Yellow Corp	YELL	30.41	29.05	H