Dow Jones 10368.86 +262.73  9:08 pm EST, Saturday., March 2, 2002  NASDAQ  1802.74  +71.25  For info, visit access.smallcapnetwork.com .  S & P 500  1131.78  +25.05  To be removed, please click here .  Russell 2000    478.34  +8.98  VOLUME 02: ISSUE 16 SmallCap Digest Weekend Edition: Are We Out Of The Bear Market? That is the question on everyone's mind these days.  First, let's define Bear Market?  There is no "official" definition but the generally accepted definition is a decline of roughly 20% or more in a broad stock market index, such as the Dow Jones Industrial Average (DJIA) or Standard & Poor's 500 (S&P 500). Using this parameter, one of these major indexes is out of bear market territory while the other is still in the trenches. The DJIA hit a peak of 11,908.5 on January 14, 2000 and Friday's close of 10,368.86 leaves it approximately 13% off its all time high.  The S&P 500's all time high is 1553.11 which occurred almost two years ago on March 24, 2000.  Friday's close of 1,131.78 leaves the index 27% from its all time high. The recent surge in the DJIA have been led by companies such as Wal-Mart (WMT), International Paper (IP), Johnson & Johnson (JNJ), and Caterpillar (CAT) which are all trading at or near 52-week highs. The markets are coming out of a "Darwinist Period" where weak companies were allowed to die.  Similar to how companies must cut back and make adjustments in a down environment, so too must the markets.  The result is an increased number of bankruptcies across all industries. The companies that immerse from this period will become stronger and more dominant than before.  Take a look at the companies that make up the DJIA. Investors have been getting bruised for quite some time.  This past week there were some signs of economic recovery. Fourth quarter GDP numbers were revised upward 1.4%. The Institute for Supply Management (ISM) reported that the February index rose to 54.7 percent from 49.9 percent in January. It's the best reading since April 2000.  (Readings over 50 indicate expansion in the sector and the index has been below 50 for 19 months) Consumer spending surged 6% in the fourth quarter. The improvement in the economy would lead one to assume that Wall Street is feeling pretty optimistic.  A weekly survey of investment professionals and traders conducted by Consensus Inc. showed that only 25% are bullish on the market. Why is this important? For the past last two years investment professionals (i.e. fund managers) have produced lackluster returns relative to the returns from a checking account.  The benchmark S&P 500 index has had two consecutive losing years.  However, it is little resolve to investors when a fund manager brags that he or she outperformed the S&P 500 by losing just lost 7% versus a loss of 10%.   In down markets, investors will use the yields from their CDs or savings accounts as the benchmark versus their funds performance.   In up markets, the investor will use the S&P 500 as the benchmark.  Funds that under perform the S&P 500 will often see investors yank their money and put it another fund.  This kind of pressure has the fund managers a bit gun shy. If the market continues to show signs of improvement the pessimistic fund managers will be in dire straits.  They will then have to play catch up and start using the hoards of cash they have sitting in their funds.  This starts a trickle down scenario where blue chips such as those in the DJIA will lead the charge similar to what is happening now. Eventually these companies will trade sideways as their stocks become full valued. The funds that missed out on this run will start looking for companies in the S&P 500 hoping to make up for missed gains.  This will push the S&P 500 index up forcing all funds to get back into the action.  It is very possible that we are now at the juncture where the funds will soon be chasing the market. Individual investors may have an advantage over the fund managers in this type of environment.  If there is anything positive about the horrendous performance of the stock market past two years it is that investors have become much savvier.  The ability to access information is just a few clicks away.  Information dissemination is now real time. The bottom line is that investors whether they are professional or individual must possess conviction and then take action if they want to make money. Will the U.S. economy improve in the future?  If you believe it will then the next step is to position yourself to reap profits. It is very important to diversify your holdings by owning companies in different industries with varying market capitalizations. For the first time in a while the markets look healthy. We can only hope that this is a sign of the things to come.  Here's to a new Bull Market! 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