12-27-01

Charts:  As we pointed out in part 1, the major indexes are at a critical point. If the Santa Claus rally is to take place, we should see an acceleration tomorrow, starting with NASDAQ breaking decisively above short-term resistance. If the markets fail to rally tomorrow, then the odds will begin to favor the bears rather strongly going into the New Year. In either case, we expect volatility to pick up substantially in the coming days. Aggressive traders with strong stomachs should be able to enjoy some decent gains, either on the short, or, on the long side.

SPDRs/Sectors:   Pay attention to the XAU. If it finds support at the 53-64 level, it could easily rally 10%-12%, the same but opposite holds true if it breaks support!.

12-19-01

Charts:  Yesterday we said:

" Having said that, we also want to remind everyone that on Friday we have "triple witching" and that can create several distortions. We would not be surprised to find out that big option players have different ideas, than the rest of the public that is expecting a rally."

Today's weakness in NASDAQ, and apparent strength in the DJIA and the SP500 highlight the potential for the distortions we mentioned yesterday. However -as we pointed on part 1- NASDAQ is up against resistance, while the DJIA and the SP500 had a little more room to move up, because they had fallen further below support, than NASDAQ. Our advice: seasonality does support higher prices, but do not bet the farm on it! 

SPDRs/Sectors:   The semiconductor sector was the worst performing sector of the day. It should be noted that this has been the best performing sector since 9-21-01. The reason for the robust rally was supposedly the coming economic recovery, and the assumption that semiconductor business had hit bottom. However, as more and more semiconductor companies continue to warn, the whole sector may come unglued in the coming days, or weeks.

12-18-01

Charts:  Yesterday we said:

"Today's rally could be the beginning of a trading rally of limited scope, or, just a snap-back within a larger decline. If there is follow thru tomorrow, then we would expect the rally to last until after Christmas. "

Today's follow-thru left lot's to be desired, never-the-less prices closed higher not lower! Therefore the expectation that the advance will continue until after Christmas -based on seasonal patterns- is still valid. Having said that, we also want to remind everyone that on Friday we have "triple witching" and that can create several distortions. We would not be surprised to find out that big option players have different ideas, than the rest of the public that is expecting a rally.

SPDRs/Sectors:   Pay attention to the XAU.

12-17-01

Charts:  In our weekly report we said:

"Our conclusion from reviewing the price charts, and the indicator charts is pretty simple and straightforward: Last week's decline was not enough to trigger a multi-week rally, but it is enough to trigger a "trading rally" for a few days. The odds are evenly split between a  further decline next week, setting the stage for a more robust rally, and a a trading rally of limited scope" 

Today's rally could be the beginning of a trading rally of limited scope, or, just a snap-back within a larger decline. If there is follow thru tomorrow, then we would expect the rally to last until after Christmas. 

SPDRs/Sectors:  A few days ago we remarked how unusually "quite" biotech was, and we opined, that more likely it was getting ready for a move of some magnitude. Today, biotech was the best performing sector, leading the rally in Nasdaq. We expect biotech to lead the way, if the rally continues.

12-13-01

Charts:  

Yesterday we said:   

"In our weekly report we said that the chart pattern of the indicators -based upon past observations- was suggesting a down day on Monday, a failed rally Tuesday-Wednesday, and then lower prices going into the end of the week. Monday, we had the down day, yesterday,  we had a rally that failed towards the end of the day, and today we had an up day, thanks to a late surge.  So, tomorrow is the test. If the markets rally, in excess of 1.5%, then the pattern will be negated, if they fall, in excess of 1.5%,  the pattern will be confirmed and we will be looking for lower prices into early next week. "

Today, the markets "failed" the test under the pressure from more profit shortfalls, and data that suggest the recovery may not be around the corner, as the markets have been expecting. The markets finished the day at support levels, so, a bounce tomorrow can't be ruled out. However, if the markets close below these support levels tomorrow, then we would want to stay short over the weekend.

SPDRs/Sectors:  The networking sector  continues to lose ground, as more companies indicate that they see no turn around yet. 

12-12-01

Charts:  

In our weekly report we said that the chart pattern of the indicators -based upon past observations- was suggesting a down day on Monday, a failed rally Tuesday-Wednesday, and then lower prices going into the end of the week. Monday, we had the down day, yesterday,  we had a rally that failed towards the end of the day, and today we had an up day, thanks to a late surge.  So, tomorrow is the test. If the markets rally, in excess of 1.5%, then the pattern will be negated, if they fall, in excess of 1.5%,  the pattern will be confirmed and we will be looking for lower prices into early next week.

SPDRs/Sectors:  We continue to see weakness in biotech and networking stocks. We believe people are taking profits, after the spectacular run these two sectors had the past few weeks.

12-11-01

Charts:  

In our weekly report we said that the chart pattern of the indicators -based upon past observations- was suggesting a down day on Monday, a failed rally Tuesday-Wednesday, and then lower prices going into the end of the week. Yesterday, we had the down day, today,  we had a rally that failed towards the end of the day.  Thus far, the market has acted according to the way the indicators were predicting. Therefore, the expectation  should be that the patterns will be completed.  Remember, these patterns suggest a bearish outcome. Although nothing is 100% certain when dealing with the stock market, the odds at this point do favor lower prices ahead, so, if you are long the market, do not be complacent. 

SPDRs/Sectors:  Today, was a "mixed bag" which is also another sign of an impending increase in volatility.

12-6-01

Charts:  Yesterday we said:  

"In our weekly report we also pointed out that we were expecting a 5% to 6% move within 3-5 trading days, which apparently we are getting it on the upside. The  patterns in both the price charts, and the indicator charts, lead us to believe that we will probably see some consolidation over the next two trading days, but the move should continue."

Today's action,   for all practical purposes,  can be classified as consolidation. However, we want to reiterate that at this point, "calling" the market is rather tough, due to the many contradictory signals. For example, Mark Young pointed out today: 

" Some have pointed out that Putt/Call ratios are somewhat high, and they were today, but it seemed like most of the volume was in the Dow and SPX options, which tend to be more "smart money" dominated. The OEX P/C ratio was flat. To our mind, the Institutionally-dominated instruments have a lot of bears, while the amateur dominated instruments (Rydex and OEX option buyers and AAII participants) have a lot of bulls. Who's likely to be right?"

 We have also pointed out that,  price action, and cumulative volume,  support a bullish case, while all the other indicators support a bearish case.  The lesson we have learned over the years -along with the scars to prove it-  is this: the only certainty about this type of market environment is its high risk, so enjoy the ride if you are long, but do not be complacent.

SPDRs/Sectors:  The networking sector appears to have all the momentum at the moment, so, you may wish to check out the IAH. However, consider the following: The market is telling us that networking gear  manufacturers will see a pick up in orders next year, while yesterday Sprint, announced that they cut their capital expenditures for 2002 by 35% opposed to the 20%, that they had originally announced. If the companies that actually buy the stuff, are planning to cut even more their purchases, where is the improvement in orders going to come from next year? If you know, please tell us, so we share the information with everyone else. For more on the subject you may want to read this article: http://www.thestreet.com/tech/scottmoritz/10004884.html

12-5-01

Charts:  Yesterday we said:  

"The bulls and the bears have been fighting a battle around the uptrend line going back to September 21st. The bears have been unable to push the market below support, so the bulls were able today to rally it off of support. In our weekly report we said that we were expecting a 5% to 6% move relatively quickly, and we indicated that it can happen on either direction - Whether today was the beginning of  further gains, has yet to be seen, but no one can deny that the bulls scored big! "

In our weekly report we also pointed out that we were expecting a 5% to 6% move within 3-5 trading days, which apparently we are getting it on the upside. The  patterns in both the price charts, and the indicator charts, lead us to believe that we will probably see some consolidation over the next two trading days, but the move should continue.

SPDRs/Sectors:  The networking sector appears to have all the momentum at the moment, so, you may wish to check out the IAH. 

12-3-01

Charts:  The technical condition of the market deteriorated -especially in the senior sector, SP500 and DJIA- however all indexes managed to close above support. Given the technical deterioration, we would expect more weakness, if not tomorrow, later in the week. We will repeat what we said in our weekly report:

"...Therefore, the only logical conclusion that can be drawn is this: the risk on the downside has increased over the past week. Although it does not mean that the market's demise is imminent, it does mean that those who are long, or, wish to go long must not be complacent. Be alert!"

SPDRs/Sectors:  Gold stocks have been the best performing stocks four out of the last 5 trading days. However, the XAU is still below 55. It would be bullish for gold if it breaks above this critical resistance level.