(8-29-02)

Today the markets tried to rally against resistance and stopped short from it. The key thing remain whether they break above the support, or, the resistance levels shown in the table below. With regards to tomorrow, it would be kind of unusual to get  a big rally ahead of a long weekend, the odds favor little change, or, if it is big change, to be on the downside (notice that the Thrust Oscillators are still declining). In any case, by next week things will clear up, and will set the tone for the month of September.

(8-28-02) 

Today the indices broke support, and fell out of wedge formations while all the indicators accelerated on the downside as well.  Tomorrow the market can go either way, it can sell hard to the downside targets, or, try to rally against resistance. It is quite normal to rally back up towards previous support -which now constitutes resistance. The odds for either action are almost even. If the markets fell down to the first downside targets, we would expect at least a day, or, two of a bounce, meaning it would make sense to try a few longs. On the other hand, if they rally up to resistance, close the gap from today and turn down again, it would make sense to go short. If looking for a trade, wait to see how things unfold tomorrow.

8-27-02

 Since last week we pointed out all the signs that were suggesting  that -at least- a short term top was in the making Today's action confirms that the highs reached like Thursday signified a short-term top. The question now is whether the pullback turns out to be a minor one, or, a severe one.  We suspect that  it will be a severe one, due to the similarities in the patterns formed by our indicators between now and the move off the September lows of 1998, which ended up retesting the lows. However, our suspicions are NOT confirmed yet. For that to happen we would need  support to be broken and the 1st downside targets to be met. We think it will happen because the  Thrust Oscillators have accelerated on the downside, suggesting more price weakness to come. KEEP AN EYE ON THE DOLLAR, it holds the key. If it breaks down, it will take the market with it. (Unfortunately, foreigners do not watch CNBC, so, they are uninformed that a "new bull" market has started in the U.S.!)

8-26-02

  The markets did find support at the levels we indicated in the weekly report and then rallied. We view today's action as potentially bullish for another day, or so, but bearish 2-3 days down the road. As you probably noticed all of our  indicators have turned down, while the McClellan Oscillator is in highly overbought territory. The market may be able to overcome resistance and run up to the 1st upside target. However, such move won't be confirmed by any of the indicators setting up for a sharper decline afterwards. 

8-22-02

  Today the markets closed above the first resistance targets, thus our expectation is that they will reach the second resistance levels, which are not all that far from today's closing prices anyway. It may be boring to state the same thing over and over again, but we will say it anyway. Intermediate term rallies last 12-24 weeks, we are only 4 weeks into it if indeed we are having one, wait for a correction if the indicators stay positive, then go long.

8-21-02 

Today the markets made a second attempt to overcome Monday's highs, but only NASDAQ was successful in doing so marginally. At the moment the market is in uncharted territory. We have not had one incident in the past 30 years that the markets haven't pulled back given the same type of overbought readings we got now. Of course there is a first time for everything, and now may be that time! However, when making trading decisions based on probabilities, one could not possibly justify going long at these levels. Having said that we want to reiterate that any pullback should be bought.

8-20-02

  Today the markets eased off, which can be expected given the how overbought the markets got yesterday. Whether today's action marks the beginning of the pullback we are expecting, or not, it's hard to say. However, if the markets make an attempt to move higher tomorrow and they stumble as they reach yesterday's highs, OR, they penetrate yesterday's lows while volume increases, then in all likelihood the pullback has started. From our point of view, we can't rule out another attempt at taking out  resistance tomorrow. However, our short-term indicators are very close to giving a short-term sell signal. It may come tomorrow, it may come in the next 2-4 days.

8-19-02

  The indices broke above resistance and if the rally continues they should be headed towards the upside targets shown below. As we mentioned in the weekly report, at the moment the markets are extremely overbought, so the odds do not favor further gains. However, the important thing to remember is that a McClellan Oscillator reading of +224 that we got earlier today, implies that we should see higher prices for the  intermediate term, thus the  pullback -from current overbought levels-  ought to  be bought for  rally that should  last into the end of the year. We would like to share with you an observation that we have made: several of our indicators are acting very similarly to the way they acted after the first low on September 1st of '98. If you recall the market rallied until late September, then it went all the way down to the September 1st lows, and after a successful retest of those lows on 10-8-98, the market blasted off.  Based upon these observations, we think it highly likely that we can have a repeat of that pattern, which means we will see a retest of the  July lows sometime in early September, and then the market will take off for a powerful rally that will last into January. Obviously we got to watch and see how the pattern develops from here, but if does play out like that intermediate term investors should get an incredibly low risk entry point sometime within the next 3-4 weeks.

8-15-02

 All the indexes experienced minor break-outs, suggesting a continuation of the rally. However, by most measures the market is overbought, thus, the odds favor a pullback first and then a continuation of the rally. Could it happen the other way? Of course, but in this business we take risks based upon the probability  of the outcome. Given that the McClellan Oscillator is at +160, the probability of a pullback at this point is better than 70%. On the other hand, if the market rallied and the Oscillator moved above +200, then we are talking about a whole new game! Readings in excess of +200 signify the beginning of major bull moves. 

8-14-02 

We could be on the verge of a bullish break-out if we get follow thru tomorrow. The Quantifiers went positive, the BSEs are positive, the TIs are positive, all we need is confirmation from price. Since we did close above the 1st resistance level, we should expect any continuation to take the indices to the next upside target.

8-13-02

Charts:   Yesterday (8-12-02) we said: "Unless we get some catalyst that propels the market higher, we should see a pullback starting in earnest tomorrow. One thing that we do want to emphasize is this: it has been our observation over the years that when the majority of our indicators turn down from below zero, the ensuing pullback tends to be in excess of 7% over 75% of the time."

(8-13-02) We have said several times the past few days that we were expecting a decline to start on Tuesday, thus, there was no surprise with today's decline. The question is whether it is a part of a 1-3 day consolidation pattern which will lead to higher prices, OR, it marks the end of the rally from the July lows. It is too early to tell. As we pointed out  on page 1, both the SP and the Dow have held above the short-term rising trendline, while  the McClellan Summation Indexes are rising, implying that the decline should be shallow. However, our own indicators have turned down from below zero. As we pointed out yesterday, it has been our observation over the years that when the majority of our indicators turn down from below zero, the ensuing pullback tends to be in excess of 7% over 75% of the time, implying that the decline should be a sharp one. We need to wait one more day in order to get a more clear indication of which scenario is playing out (consolidation, or, resumption of the downtrend) It should be noted that many pundits, gurus, analysts, etc., are expecting a shallow decline, so , from a contrarian point of view it makes sense not to get one. Pay attention to the support levels: 

8-12-02

Unless we get some catalyst that propels the market higher, we should see a pullback starting in earnest tomorrow. One thing that we do want to emphasize is this: it has been our observation over the years that when the majority of our indicators turn down from below zero, the ensuing pullback tends to be in excess of 7% over 75% of the time.

SPDRs/Sectors:   

8-8-02

We are seeing the building blocks of a new uptrend being formed. To have confirmation we would need one more pullback holding at the rising support line we show in the charts on page 1. We are viewing the current action as constructive, but judging from the fact that most of our core indicators are still below zero -despite the huge rally from the July lows- we must conclude that another test of those lows can't be ruled out. In fact the market and our indicators are acting very similarly to the way they acted in 1998. The market rallied sharply, while the indicators turned neutral, then the market came down and re-tested the lows. 

 Bottom line:The markets did move close  to the second resistance level already, thus, if they are able to break above those levels, then we would expect them to move to the 3rd resistance level before we see pullback

SPDRs/Sectors:   Notice that high tech has been mostly absent from the best performers list.

8-6-02

Charts:    Today's  early action  was bearish, but the late action was bullish! Overall -in our view- today's performance should be considered neutral with a modest upside bias.

 Given that :

a) the market are still below resistance (which means there is still some room left on the upside)

b) the quantifiers improved by 9 points 

The most logical conclusion is to expect the markets to struggle their way higher for another 1-3 trading days, as long as, they do not drop below today's lows. 

Bottom line:  Since the markets closed slightly above the first resistance, we are expecting that they will move higher to the second resistance level by Tuesday.

8-6-02

Charts:   Yesterday (8-5-02) we said: "...we also need to point out three factors that may result in a slightly  positive day tomorrow,  :

 a) as we pointed out on page 1, all major indices ended the day at support, thus,  it would not be unusual to see a one day bounce from those levels

b) notice that our short-term Summation Indexes are  in the area from where we always get a rally, even if it is only a short-term one. 

c) the markets have declined for five consecutive days.

The combination of all these three factors may result in halting the decline for at least tomorrow.

(8-6-02) The 3 factors we pointed out last night did their job, and pulled the markets higher.  Whether today's reversal has strength to carry the markets higher, depends upon the markets' ability to move above today's highs. If they  fail to do so, and more importantly, they close below today's lows, then we should looking for new price lows by the end of the week. Short-term traders may go long above the first resistance level for a run to the second, or, go short below the first support level, for a run to the second.

Bottom line: Tomorrow pay close attention to the following  support and resistance levels:

8-5-02

The market suffered another wave of selling, triggered by newly released economic data suggesting that the economy is on the wrong track. Keep in mind that it  is nearly impossible to keep a rally going when every piece of news   confirms economic weakness.  "Technically speaking" almost single every one of the indicators we use is in negative territory, the quantifiers are below -20, the Trend indicators are declining, the McClellan Summation Indexes are turning down again, liquidity is plain rotten, and the Thrust Oscillators turned down, indicating that the rally from the 7-24-02 has in all likelihood ended.  Consequently,  the logical expectation is for lower prices over  the next  2-3 days, followed by another reflex rally towards the end of the week.  Having said that, we also need to point out three factors that may result in a slightly  positive day tomorrow,  :

 a) as we pointed out on page 1, all major indices ended the day at support, thus,  it would not be unusual to see a one day bounce from those levels

b) notice that our short-term Summation Indexes are  in the area from where we always get a rally, even if it is only a short-term one. 

c) the markets have declined for five consecutive days.

The combination of all these three factors may result in halting the decline for at least tomorrow. Of course all bets are off, if the markets fall below today's closing levels  right from the opening and they are unable to reverse course. 

8-1-02

Charts:  :Yesterday we noted:  "One real troubling development, is that the rally has not been accompanied by any news hinting that the economy and the fundamentals are improving. In fact, the exact opposite holds true. For a rally to last for several weeks, even the "optimists" need some evidence  supportive of being optimistic!"  The latest economic data suggest that any recovery in corporate profits is several quarters away. It is nearly impossible to keep a rally going when every piece of news that comes confirms economic weakness. Tomorrow, we will get the un-employment numbers for July. Both the bulls and the bears can use the numbers to drive the market their way. From a technical point of view, we should notice that the Thrust Oscillators appear to be topping out, but given the magnitude of the up-thrust, we must conclude that the markets should be able to hold at the second line of support.

Moreover, as we pointed out yesterday, the 5 day Summation index was indicating that a pullback was coming. Usually, that pullback -given the magnitude of the thrust- is arrested at the first line of support -which is where the markets closed at today. Yesterday we drew in blue the most possible scenario given the pattern of the index. In all likelihood the rally is not over yet, the markets can bounce tomorrow from current levels, or, Monday from the second line of support. 

Bottom line: Continue to pay attention to support and resistance levels, aggressive traders may go short if support levels do not hold, or, long if they do. However, be prepared to exit either position on a dime.