(12-26-02)The indices continue to consolidate in a narrow range with a slight negative bias refusing to grant the wishes of either the bears, or, the bulls for a "break." On one hand we have "positive seasonality" holding the markets up, on the other, we have a continuous barrage of "negative news" such as intensifying geopolitical pressures, abysmal retail sales etc., preventing the market from rallying.  We do not see much of either changing until after the 1st of the year.  Until then we remain short-term neutral and we would use the resistance/support levels listed below to make day-to-day trading decisions with regards to trading the major indices. For the intermediate term we are holding on -until we get stopped out- to our positions in gold, oil and defense stocks as discussed in Mr. Iossif's interview on 11-16-02.  For tomorrow's trading pay attention to the 895-900 level for the SP500. If we get an early rally that runs out of steam in the 895-900 zone, then we should look for lower prices at the close. Special note: The put/call ratio is now bearish.  The Volatility indexes are near the level from which recent market declines have started. (see next page)

(12-19-02)The indices are consolidating in a tight trading range -see charts on page one. Today they closed at the bottom of the range, which suggests that tomorrow, either  we will get another rally back up towards the upper end of the range, or, we will have a break down that will take the indices to the downside targets listed on the table below. Tomorrow is quadruple options expiration day, and anything is possible.  The markets are getting quite oversold, and the BSE along with the Thrust Oscillators have formed a minor positive divergence,  on the other hand, the intermediate term indicators are solidly negative.  Thus, at this point we rate the odds almost equal for either a break down, or, a bounce from an oversold condition.  For tomorrow's trading, keep an eye on the 890-894 level in the SP, if any early rally is aborted  at that level, then we should see a lower close. If the SP can negotiate the 890-894 zone successfully, then look for further rally to the 910-912 level.

(12-18-02)  Today's decline was accompanied by declines in all of our indicators, which suggests that we should have follow thru to the downside. In fact the "logical" expectation should be one of lower prices, given the confirmation we have from our indicators. However, there is a caveat, this Friday we got "triple witching" which sometimes results in "illogical" moves. Thus, expect the indices to move lower and test support of the downside targets, but be aware that we may get a rally coming out of nowhere. For tomorrow's trading keep an eye on the 895-900 zone, if the SP can't get above it, it will head lower to our downside targets. If it can get above 900, then it will re-test resistance at the 910-912 zone. 

(12-17-02)  In this morning's "Before The Bell" we said: "We can see from the charts below, that there is an inverted head and shoulders formation in the making, which if it comes to full completion targets 1420-1425 for NASDAQ, and 920-925 for the SP.  First and foremost though, we got to watch for resistance at 1410 for NASDAQ, and at 912 in the SP. AS we mentioned in yesterday's report, we do not believe that the equity markets can continue to ignore for a second day rising oil and gold prices and a declining dollar, all three of which, seem to be taking place again today.  For support we have 904-900 for the SP, and 1390-1385 for NASDAQ. If they break support, it is conceivable that they can  re-trace yesterday's entire advance." 

The indices backed off from resistance.  On the other hand they closed above support. Thus, we view today's action as neutral.  We continue to believe that there is a tag of war between "positive seasonality" and a larger negative background made up of geopolitical tensions, currency instability, and deteriorating fundamentals. Whether "positive seasonality" will be able to overcome the negatives of the greater background, is anybody's guess. Our approach between now and the end of the year, is to take one day, one resistance/support level at a time.  Be mindful of the "positive seasonality" but also be aware that there are also several negatives that can tip the balance over to the downside. The "Santa Claus" rally is not a birth given right. Keep your positions small.

(12-16-02)  In this morning's "Before The Bell" report we said: " As it can be seen very clearly in both the 30 and 60 minute charts, the indices are in a well defined down-trending channel with resistance at 1390 for NASDAQ, and 897 for the SP. If that resistance was to be overcome, then, the next target would be the 1400-1410 zone for NASDAQ, and the 910-912 zone for the SP"  As it turned out, the indices broke above the intra-day down trend and rallied to the next upside resistance. The remarkable part is that they did it while the dollar fell, and oil prices and gold prices surged! This is an anomaly, and we do not think it can continue, either the dollar will stabilize and oil prices will retreat, or, equity prices will retreat.  Our short-term indicators such as the McClellan Oscillators, Thrust Oscillators, BSEs, are pointing up, which means the market can carry higher -at least to the next resistance level- and perhaps even back up to the November highs, we do not think they can go higher than that due to the fact that the intermediate term indicators have all turned down, and they  have fallen below the zero line. Also, another thing to keep in mind is that the pattern (see charts on the left) is quite similar to what we saw after the August highs.  The difference is "favorable seasonality." With no doubt the precedent has been for the last two weeks of December to be positive, and it may very well be that the indices carry higher. We strongly suggest that investors/traders take it one day at the time. We would expect that if the SP broke above 912 tomorrow, it will rally to 925. It is not unusual at all for the indices to rally from support at their 50 day SMA, to resistance at the 20 day SMA.  We believe that  given that this is options expiration week, it lends room for volatility and choppiness. Thus, we should not be surprised to see a downside reversal at the next upside target (NASDAQ:1420-25, SP: 920-25) tomorrow and yet another upside reversal as we approach option expiration. The bottom line is, take it one day at a time and keep your positions small in size.  As we mentioned in the weekly report, given the similarities, we may get another surprise, that one on the downside.

(12-12-02)There was not much change today. Yesterday's commentary still stands. However, the BSEs and the Thrust Oscillators have turned up, and that suggests that the balance is beginning to shift slowly to the bullish side. One thing that can change the balance again, is continuous weakness in the dollar. The market managed to hold together today, but if the dollar broke support, we do not think the market will be able to ignore such development. Again,  pay attention to resistance and support levels, and make sure you read tomorrow's "Before The Bell" report for developments overnight. 

(12-11-02)Today's action can be characterized by the bulls as  "backing and filling" in preparation of a move higher, or, it can be characterized by the bears as a "bear flag" in preparation of moving lower. Some of the indicators such as the McClellan Oscillator, and the Thrust Indicators are supportive of the bullish case, others  like The Summation Indexes, BSEs, and SI25s are supportive of the bearish scenario. When we put it all together, a neutral picture emerges. The market is in need of a catalyst to push either higher, or, lower. Tomorrow we are getting the retail sales report, and the current account deficit. Either, or, both can be a catalyst. If you're long keep an eye on the 892 support level for the SP500, if it falls below it, it will go to 870-875. If you're short keep an eye on the 912 level, if it breaks above it it will go to 921.

(12-10-02) Today we got a bounce, however, in our view, its durability is questionable. All the indices experienced "inside" days, the Quantifiers and the Thrust Oscillators continued to deteriorate, and  NASDAQ could not even manage to close above the first level of intra-day resistance at1391. It could very well be that tomorrow turns out to be a better day, but in our view, we need to consider the possibility  that the indices have another shot down within the next couple of days. In such case we will see the downside targets met, before a more sustainable advance takes place.  For tomorrow's trading keep an eye on intra-day resistance levels; NASDAQ:1391, 1411, 1422, SP:908, 912, 921.

(12-9-02)  The markets sold off sharply, with NASDAQ reaching deeply oversold levels, and a  .382  fibonacci retracement level. Notice that NASDAQ has bounced off every time the McClellan Oscillator, and the 5/10 day SIs have reached current levels. We do not see it falling below 1325 , unless the markets are on a crash course-which we do not believe to be the case at this point.  Based upon the estimates of our models the SP could fall to 885 (7% below 954) and maybe even to  870 (9% below 954) We expect a bounce from these levels, unless the markets are on a crash course-which we do not believe to be the case at this point.   We were buyers today (IBB) and we will buy again tomorrow the SPY, if the SP falls to 870. However, the important thing to keep in mind is that the rally from the October lows is in all likelihood over. Whatever bounce comes out of this decline, should be shorted once it is over.

(12-6-02)Last Thursday (12-5-02) we said: "... One thing we need to keep in mind  -due to the rather poor price action the past two days- is that despite how oversold the markets are, they may not hold at the 1st downside targets, and indeed they may not find support until they reach the second ones listed on he table."

(12-5-02)  For the second consecutive day, the markets rallied early in the morning, then fell apart, tried to mount a rally late in the afternoon, and fell apart again, concluding 5 straight days of losses. Meanwhile they have come close to our downside targets, but they have not made contact. We had expected that to have  happened, yesterday, or, today. Instead the markets are taking their sweet time. By several measures -such as the McClellan oscillator- the markets are at a point from where they usually bounce, thus, the odds favor  that they will in the short term. However, many of our intermediate term indicators such as the TIs, and the Quantifiers have turned down, suggesting that the intermediate trend is in jeopardy. Therefore, we are still expecting to re-establish net short positions next week, assuming the  bounce    fails to establish new recovery highs, which will confirm that the rally from the October lows has ended. One thing we need to keep in mind for tomorrow -due to the rather poor price action the past two days- is that despite how oversold the markets are, they may not hold at the 1st downside targets, and indeed they may not find support until they reach the second ones listed on he table.

(12-4-02) The popular indices found support at their 20 day SMA, while the McClellan Volume Oscillator is near support, the VXN made contact with its 20 day SMA, and several of our indicators are near the zero line. The expectation based on the combination of these four observations, is that we should see a bounce lasting 2-3 days that will take the SP up to 940, and NASDAQ up to 1470-80, perhaps higher. However, with the TOs, and BSEs pointing down, we expect the bounce to be followed by yet more weakness that will take the indices  to the second downside targets over the next 10-15 trading days.  Since the indices came close to our downside targets but did not make contact with them, we suspect that it can happen early tomorrow morning, followed by another upside reversal by mid-day.  In any case, whether we saw a low today, or, we will see it tomorrow, we still expect a bounce, followed by another decline. Thus, traders may take a small long position (30%-35%) expecting to sell it within  2-3 trading days, and then re-establish short positions next week.

 (12-3-02) Price broke down today while all the indicators accelerated to the downside, suggesting that the downside targets listed below will be met. However, something that we want to bring to our subscribers' attention is the similarities in price action between now and last year, prior to the final top. Notice that last year, NASDAQ was on the verge of forming a top, and then we got two days of sharp upside movement on low volume, and that marked the termination of the rally from the September lows. As you know from our weekly report, we are looking for a 6%-7% decline, and  for  "split price action" this week, meaning we are looking for a reversal of the prevailing move by mid-week. Thus, if support holds, we may see another sharp movement on the upside by the end of the week.That scenario will be negated if the first downside targets are violated, and the bulk of our indicators go below zero. The key thing to keep in mind, is that we should be on alert for a possible top, but now is not the time to be heavily short (no more than 30%-40%) The time to pile up on shorts will be when we get a rally from support levels, which fails to make new highs, OR, after the market violates support, comes back to test it as resistance and fails. 

For tomorrow we should look for a possible reversal to the upside after the indices make contact with our downside targets.

(12-2-02) The markets reversed as they approached significant resistance levels. However, they did not violated support, in fact they closed right above it. By definition, as long as support is not violated the trend is up, given that most of the indicators turned down -BSE, Thrust Oscillators, McClellan Oscillators, SI25s- the expectation is that price will break support. However, the Quantifiers turned up, suggesting another run towards the highs.  Given the dichotomy we continue to believe that we are going to end up with  "split action" this week, meaning we should see a reversal by mid-week of the trend that has prevailed during the first part of the week.  In addition, we want to emphasize that such non confirmation between price vs indicators, and indicators vs other indicators which usually confirm each other is a sign of increased market risk, which is not being reflected in the price action. It should be noted also, that 20% of our guests have now turned "neutral." This is an unusual high percentage of people who normally have a very strong opinion about the markets. It has been our observation in the past, that when such a high percentage of our guests are non-committal to the markets, usually the markets are near a turning point.