Serials by Kellogg

Speculative manias occur from time to time. When they do, they always burst and usually viciously. From October, 1999, through to March, 2000, a handful of technology stocks propelled the NASDAQ Index out of a quite respectable primary-trend channel to make a new mania high.

CNBC reported such ridiculous comments as how the "new" economy was replacing the "old." That was your first clue. Feeling justified, many fund managers carelessly tossed aside valuable and venerable companies to make room for "dot-coms" and other inexperienced players in cut-throat technologies.

The bubble finally burst in April with a vengeance. What must follow, however, is enough failed market recoveries to fully offset the mania excesses (see Chart "triangle" areas). Right now the "least-squares" trend line with the mania excess is still over 15% steeper than the previous primary trend line without them.

The NASDAQ should continue its current failed-recovery pattern at least through the last "triangle" shown.