Investors better get used to a market that doesn't always keep rising over the long term.

At least that's the viewpoint of John Bollinger, head of Bollinger Capital Management and a technical analyst who's best-known for developing the

Bollinger bands, a widely used technical indicator. According to Bollinger, the next decade may well be defined by the highs of early 2000 and the lows of late 2001, making the choice of one's entry and exit points all the more important.

Here Bollinger, who recently wrote

Bollinger on Bollinger Bands

, discusses his outlook and whether he expects the period of

small-cap outperformance to continue.

TSC: What's your take on the market in 2002? How do you think investors should posture themselves?


From a very long-term perspective, we have entered a trading-range environment. I think the trading range will really be defined from the peak in 1998. Were it not for the

Fed's enormous infusion of liquidity for the anticipated Y2K problems, the peak in 1998 would, in fact, have been the peak of the trading range. I think that the early 2000 highs and the late 2001 lows will nicely define stock prices perhaps for the rest of the decade.

That doesn't mean that there won't be tremendous opportunity within the confines of that range, but it means that investors who are betting on the long-term positive trend of the market to bail them out of their mistakes are going to be severely disappointed. I think this is going to look like the period from 1966 to 1982. In 1966, the

Dow first approached 1000. In 1982, the Dow finally broke 1000. You had a period of 16 years where the averages went nowhere, but during those 16 years, there was a tremendous amount of opportunity for investors. Some of it was relatively short term, some of it much longer term.

John Bollinger,
Bollinger Capital Management

Recent Meet the Streets

Credit Suisse Asset Management's
Christopher Bianchet

Gartner Dataquest's
Todd Kort

Rittenhouse Equities'
John Waterman

Erma Roquemore

Illinois Institute of Technology's Institute of Design's
Chris Conley

Templeton World Fund's
Jeff Everett

Investors need to wrap their minds around the concept of a trading-range market instead of a trending market and look to buy important lows they find attractive and look to sell important highs in those same stocks.

TSC: Any themes that you're looking at in particular for the next year?


Yes, there's one theme that I think is going to be important, and that's size.

It's now been almost 2 1/2 years that small- and

mid-cap stocks have been outperforming

large-cap stocks. If you look at a relatively simple measure, something like the S&P 600, which is a small-cap index, divided by the

S&P 500, which is a large-cap index, it just last week went to a new recovery high. That suggests that the trend in small-caps vs. large stocks is still very much intact. We expect that trend will play out, at the very shortest, through next year, if not for many years beyond.

TSC: Anything else?


The last thing I'd like to mention here is that, cyclically, this is the best time of year to own stocks. From roughly the middle of December to roughly the middle of June. It's the time of the year that the vast majority of all gains in the stock market are racked up.

Investors are by and large shy of the market right now, having experienced a tremendous decline in stock prices from the first quarter of 2000 to the third quarter of 2001. However, this is exactly the time they should be close to fully invested and enjoy what looks to be a relatively good six months for stocks. has a revenue-sharing relationship with under which it receives a portion of the revenue from Amazon purchases by customers directed there from