Sideline Cash Buckles Chin Strap, Gets Into Game

That the Comp was up despite Network Associates' blowup also was cause for modest rejoicing.
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GuruVision: Housecleaning 2000

Before resolutions and

Auld Lang Syne, this time of year begs for taking care of unfinished business. For many investors, that apparently means putting to work some of the heralded cash that's been on the sidelines, judging by today's market action.

The

Dow Jones Industrial Average

and

S&P 500

each rose about 1% today, while the

Nasdaq Composite

gained 1.8%. The Comp's session was even more impressive, given the huge blowup at

Network Associates

(NETA)

, which tumbled 61.5% on nearly 75 million shares, by far the session's most actively traded stock.

Trading activity was modest, but up from yesterday when a lot of market players were still on holiday. In

Big Board

trading, 1.1 billion shares were exchanged and advancing stocks bested decliners by nearly 3-to-1, while new 52-week highs bested new lows 310 to 78. In Nasdaq action, nearly 2 billion shares traded, and gainers led 7-to-6, although new lows led 386 to 130.

Notably, investors showed interest not only in recent winning sectors such as health care, energy, financials and consumer staples, but also retailing and technology stocks -- chip stocks such as

Applied Micro Circuits

(AMCC)

being standouts among the latter. The

Philadelphia Stock Exchange Semiconductor Index

rose 4.3%.

Generally speaking, it's not a good idea to read too much into pre- or post-holiday trading, and this week covers both. But clearly, the eagerness and willingness of many investors to buy equities remains intact, regardless of how difficult a year this has been for most.

As for this column's unfinished business, today we present a long overdue update on Bob Brinker, editor and publisher of

Bob Brinker's Marketimer

and host of

ABC Radio's

MoneyTalk

.

We last visited Brinker's world back in

mid-October, shortly after he'd recommended that newsletter subscribers buy the

Nasdaq 100 Trust

(QQQ) - Get Report

.

At the time, Brinker's expectation was for a "countertrend rally" within an ongoing bear market -- rather than the start of a new bull phase. But he recommended that aggressive subscribers use up to 50% of their cash reserves for the trade, predicting gains in excess of 20% over a two- to four-month period from the QQQs' Oct. 12 closing low of $75.13.

The QQQs closed at $86.19 on Oct. 23 -- a near 15% gain from the Oct. 12 lows -- but have been in a near uninterrupted descent since, closing as low as $55.73 on Dec. 20. Today, the QQQs rose 1.1% to $61.56, or 17.9% below Brinker's presumptive rally point.

Around the time of the mid-October "buy" call, Brinker announced he would no longer make short-term market calls on his radio show, apparently upsetting and confusing some listeners. Newsletter subscribers, who pay $185 per year for exclusive calls, did receive updates on the QQQ trade.

In the Nov. 6 issue, Brinker reiterated the initial recommendation, adding that "we would view any subsequent near-term resisting of the 2850-3075 zone

on the Nasdaq Comp as an exceptional short-term entry point." This would correspond to a price range in the low-to-mid 70s for the QQQs.

Brinker also wrote he would provide an "exit point" for the trade in a future newsletter or on his Web site, where a special subscriber-only section was created. That move, I gathered, reflected a response to the challenge Brinker faced with the mid-October call -- a "special bulletin" rather than a regular issue -- of trying to provide real-time and simultaneous updates to subscribers who usually receive the newsletter via snail mail.

In the Nov. 4 newsletter, Brinker acknowledged that "events have carried the Nasdaq Composite lower than we anticipated in the short term,

but they have not provided a basis for changing our short-term market outlook, which projects a major countertrend rally."

Evincing the courage of his convictions, Brinker predicted the Comp could rise 40% to 50% from its late-November lows around 2600, and the QQQs could reach $90 in the ensuing three to six months.

Despite his short-term optimism, Brinker remains "much less sanguine" about the market's long-term prospects.

Brinker wrote as much in the Dec. 4 newsletter and repeated the point in an interview yesterday, saying there is "no chance" major averages hit a "final bottom" in 2000. The newsletter writer reiterated a long-held view that the overall downward trend for stocks will not end until late 2001 or early 2002, noting that the

Wilshire 5000 Total Market Index

fell 20% below its all-time high -- and into official "bear market" territory, according to technical analysis -- just last week.

However, he declined to discuss the QQQ call, saying he didn't want to pre-empt his January newsletter.

As an aside, any previous mention of Brinker has generated some pointed and emotional emails -- both positive and negative. Clearly, the guy is a lightning rod. That he's currently short-term bullish but long-term bearish is no doubt going to inspire some and infuriate others.

In an attempt to (hopefully) pre-empt similar email responses this time around, let me say, for the record, that I'm an agnostic on the subject of whether Brinker is savior or evil incarnate.

All that

really

matters to me are the guy's market calls. And while Brinker's broader defensive call at the beginning of 2000 was prescient, his QQQ call has, to date, been an unmitigated bust.

Whether the QQQ call and/or Brinker's longer-term caution ultimately prove correct remains, of course, to be seen.

Housecleaning 2000: Part 2

Several emailers noted that the editors of

The Elliott Wave Financial Forecast

made a sage call of Dec. 11-12 being a potential Fibonacci turn date, as reported

here a few days prior.

Dec. 11, of course, turned out to be the recent peak for the S&P 500, Nasdaq Comp,

Russell 2000

and Wilshire 5000; each index saw previous upswings end on that day and fall precipitously thereafter, until (apparently) bottoming on Dec. 20.

To recap, the turns are designed to identify when short-term changes will occur, not which direction the market will go. The theory being whichever direction the market is going heading into the turn date, it will reverse course thereafter.

In a recent email exchange, Steven Hochberg, co-editor of the Elliot Wave newsletter, identified the end of January as the next major turn date, predicting "something significant in the market is going to happen at that time."

In case you'd forgotten, the

Federal Reserve

has its next scheduled meeting Jan. 30-Jan. 31. Whether the market rejoices at the Fed's decree or finds fault with the central bank is, of course, unknowable at this time.

There are some "minor turns" expected between now and the end of January, Hochberg said, including "right after Christmas Day," which now appears to have marked the beginning of an upswing.

Tomorrow: A long overdue update of our periodic report card -- weather and technology permitting.

Aaron L. Task writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.