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12.01.2001, 03:54

Top Market Timer Says, NASDAQ 5000 This Year
An InvestorLinks Exclusive Report
From the InvestorLinks.com News Desk
By: Peter Santini, January 11, 2001

Like a hot knife through butter, the NASDAQ should go through 5000 this year. That's what Don Wolanchuk says and he's one of Market Timer Digest's Top Market Timers, having won 17 annual timing awards since 1989. Some of his greatest timing calls were widely ignored by the investment community. Wolanchuk forecast the bull market rally following the 1987 crash and called for a DJIA above 10,000. When NASDAQ traded at 1800, he forecast a NASDAQ 5000. In 1999, at the bottom of the oil market, Wolanchuk called for $30/barrel oil. He was Market Timer of the Year in 1995, 1996, 1997 and 1999.

In the interview below, Wolanchuk calls for a "fast and furious" return to NASDAQ 5000. But, that's only the first level. He's calling for a NASDAQ 10,000 on its way "towards 20,000." He forecasts Intel (INTC, Chart, Boards) reaching as high as $75/share, Microsoft (MSFT, Chart, Boards) returning to $112/share, AT&T (T, Chart, Boards) reaching $60/share, and Procter and Gamble (PG, Chart, Boards) at $118/share.

Wolanchuk uses numerous historical comparisons in describing the current market conditions and helping explain why sentiment is as it is. In explaining why we should anticipate a major rally in the financial markets, he offers various technical measures, such as the VIX Index, the ARMS Index and the Advance/Decline lines. This may be the most important interview you will read this year.

Investors and curiosity seekers may wish to visit Don Wolanchuk's website for additional information about his market timing techniques at http://www.wolanchuk.com

INVESTORLINKS: How do you currently feel about the condition of the markets?

WOLANCHUK: When it becomes hopeless to everybody, which it appears to be now… In fact a few weeks ago, with the American Association of Individual Investors, you saw 51 percent bears and about 30 percent bulls. That's a flight. And rather amazing because the DOW is basically where it was a year, year and a half ago. NASDAQ the same way. The market's taken a time out with the DOW about 10,000. The same thing happened in 1991 - went side ways, drove everybody crazy. It's taken a great breather. Interestingly, we get all the bluebirds out and you've heard the words "crash" and "bubble" and every other thing from these bears.

INVESTORLINKS: The word "recession" has been mentioned more than a few times recently.

WOLANCHUK: Yes. After the crash of 1987, we had a recession and the market went straight up. Recession, fear of the stock market, everybody moving into money market funds and talk of bear markets is what bottoms are made out of. Proof of that is in the technical picture. While this has been going on, the base 52-week new highs have been steadily climbing for a year now - the stocks making new 52-week highs. Last week, there were over six hundred. The weekly Advance/Decline line just keeps climbing and climbing and climbing. Technically, we've got a fabulous situation in the moving averages of put/call ratios. We've got numbers that we haven't seen in years. We've got an ARMS index in the moving average - the last time that I saw 130. I can't remember seeing a ten day ARMS at 130. Even while the DOW has been going up here, recently, the five-day trend has been staying above eight hundred. That's incredible! The DOW, where is it? It's over 1000 out of the October low. In the mean time, we've got everybody being chased out of the stock market. It's absolutely a fabulous situation.

INVESTORLINKS: Is it fabulous enough that it's time for investors to rush back in?

WOLANCHUK: They're not going to do it no matter what I say. If I tell them to jump in here with both feet, they're not going to listen to me - just like they didn't listen to me after the crash of 1987.

INVESTORLINKS: For those that do listen to you, what should they expect?

WOLANCHUK: Every time that we have this situation, the stocks are served up on silver platter. The interesting thing is the wipeout in a lot of NASDAQ stocks is typical of an industry that attracted a lot of people - the Internet business. A horde of people went in there for fast and easy money. A lot of these companies, of course, are not going to make it and you had the initial shake out. You had all these troubles with financings that turned into death spirals.

INVESTORLINKS: Where do you see the NASDAQ heading?

WOLANCHUK: When the NASDAQ was at 1800, I said it was going to 5000. It's a perfect correction. I haven't seen anything in the wave structure to negate my idea that it's going to head - the potential is that the NASDAQ is going to start flying up past 10,000 towards 20,000.

INVESTORLINKS: The NASDAQ?

WOLANCHUK: Yes, the NASDAQ.

"Is anybody, who was on margin and who got wiped out, going to go near the margin department for probably months or years? Of course not."

INVESTORLINKS: From where to where?

WOLANCHUK: Past 5000 and a clean shot through 10,000 on it's way to 20,000.

INVESTORLINKS: You're going on record that the NASDAQ is going to 20,000.

WOLANCHUK: It's going to go beyond that eventually. There's going to be a lot of washouts in between. This is the best washout.

INVESTORLINKS: Do you think we're ever going to see an opportunity like this again?

WOLANCHUK: Just like we never saw an opportunity when it made it's low in 1998. Here we have a situation where everybody got notoriously bullish in the NASDAQ. The problem there was they were right being bullish, but they were wrong in the way that they executed it. That was by buying stock with borrowed funds on margin accounts. It wasn't anything else, but people were forced out of the market because of margin selling. Now look how clean this market is. Is anybody, who was on margin and who got wiped out, going to go near the margin department for probably months or years? Of course not. This market is very clean in that regard. So we don't have to worry about forced margin selling anymore. We don't have to worry too much about poor sentiment. After the crash of 1987 everybody thought, all through the next two years, that it was bear market rally. There's nobody going to be calling this a bull market for long time even though the weekly Advance/Decline line bottomed out a year ago.

INVESTORLINKS: Do you think we're still in a bull market?

WOLANCHUK: Absolutely. If there's nobody left to sell and everybody's bearish…I got the same thing in 1987. I feel a lot better about it now, because I'm in the minority. What's so funny is that the media said that the NASDAQ had its worst year in history. What they don't say is that, a year ago, the NASDAQ is where it is now. For the first six months it was the grandest six months in the history of the NASDAQ. Then, you had the worst six months and you ended up back where you started. That's exactly what the DOW did in 1987. All it did was go back to where it was in 1986 and the whole process started all over again. It is a hump in a chart that is continuing it's up climb. In the meantime, these stop clock bears who yet have to get religion… Can you imagine some of these stop clock bears who have been calling for the end of Western Civilization for the last fourteen years?

INVESTORLINKS: What about the bears?

WOLANCHUK: This market's not going to let them off the hook. Here we are above 10,000 pressing 11,000. If I'd told you 15 years ago, after the crash of the DOW, when everybody hated it, that they would hate it just as much above 10,000 you would have thought I was a nut. Here we are above 10,000 and everybody hates it. We are at a high level consolidation that's been stretching out for a year and a half or so in the DOW and the NASDAQ - a flawless ABC. What we call an ABC irregular flat correction in terms of Elliot where the B-Wave made the high at five thousand. Until proven other wise, anybody who says we're in a bear market