(3-3-03)Today was a rather important day, not that much because of the price reversal, but because it gives us a hint of what may be looming ahead. The markets celebrated for about 45 minutes the capture of the alleged mastermind of the 9-11 attack, and then they reversed to the downside, as soon as, the ISM and the car sales numbers came out, showing a contraction, on top, of similarly disappointing economic numbers on Friday. Today's action is a clear illustration  that the markets' malaise is not due to uncertainty over war, and fear over terrorism, it is due to a slowing  economy, and un-existing real corporate profits. In the short-term, the markets may get a lift from positive geopolitical developments, but in the intermediate term, they still have to deal with the short comings of the economy, and the absence of corporate profits thereof. 

In the short-term, the markets continue to be in a "triangle-consolidation." They have not broken down, and they have not broken out. Thus, we do not put that much significance in today's reversal, unless we have follow thru tomorrow, and a close below support.  If the markets fail to break support tomorrow, we should expect them to reverse back up again and try to take out resistance. 

 Do not let the daily reversals and gyrations confuse you, the market is "coiling" ahead of an impending break, wait until the break takes place and then act, in the mean time keep positions small, and your eyes on the bottom line.

(2-27-03) Today we got more of the same! A lowering of the "threat level" coupled with Iraq's comments that it will destroy its Al-Samud missiles, lifted the spirits of market participants, who in turn,  bid up the market. Do not let the daily reversals and gyrations confuse you, the market is "coiling" ahead of an impending break, wait until the break takes place and then act, in the mean time keep positions small, and your eyes on the bottom line.

(2-26-03)The markets reversed direction for the fourth time in four days! It is our view that the markets are "coiling" ahead of a break, which could be either a "break-out" or, a "break-down." Given that all the indicators have failed either at the zero line, or, at resistance, the logical expectation is to expect a break-down. HOWEVER, the markets are also being held hostage to geopolitical developments, thus, anything that can be perceived as a "positive development"  can ignite a rally. The markets are still laboring between support and resistance, until we have a clear break, hold your positions small with tight stops in place. Moreover, we can't emphasize enough to pay attention to the U.S. dollar, as goes the dollar, so will go the stock market.

(2-25-03) Today the markets gapped down at the opening, made contact with their lower 20 day volatility band, as well as, the lower end of their down-trending channel  and then rallied, as traders bought short-term support and short sellers covered. The SP finished the day right at resistance at the upper end of the channel, and it is not too far away from the 160 period moving average. Notice that today's rally was very similar to the rally we had on Friday, which had no follow thru on Monday.  If tomorrow the SP can get above the resistance line, and more importantly above 840, then it has a good chance to rally further above 850-853 and confirm a break-out.  So, for tomorrow's trading pay attention to this resistance line, and the 840 level, beyond that 850. If there is no follow thru tomorrow, look for a return to the lower end of the channel at 815-810. 

(2-24-03)Yesterday -in the Monthly Report- we pointed out that the majority of our indicators were near the zero line, and if the rally was going to fail, it would fail within the next 1.5%-2% points. Today the markets  fell thru-out the day while most of  the indicators slightly penetrated the  zero line.  Does that mean that the rally has been aborted? It could very well be the case, but unless the indices close below last week's lows there is no confirmation of that.  The trend as illustrated by the 10/20 day TIs, is still neutral, which means you can very easily get whipsawed by trying to guess the next move. The bottom line is this:

(2-20-03) The dollar was slammed today after  three negative economic reports indicating a larger than expected trade deficit, a larger than expected PPI number, and a larger than expected initial weekly jobless claims. The lower dollar in turn took down the Blue Chips, while NASDAQ held up, thanks partially to an upgrade of Intel by Jim Osha. It should be noted that Mr. Osha's calls on the sector over the past three years have been rather inaccurate, why this one will be any different we do not know, but this record does not inspire any confidence. Technically speaking, the indices have been trading in a narrow trading range, which can be construed as an act of consolidation. By definition, a break out of the range will determine the short-term price, in the direction of the break. Thus, for tomorrow's trading these are the numbers to watch: 

SP: 853-856, DOW: 8076-7894, NASDAQ:  1345-1310. 

Also it should be noted that the Thrust Oscillators appear to be slowing down, which means  the rally is losing its "thrust." The principal reason behind the deteriorating T.Os is the declining volume that has accompanied the rally. If the T.Os have a negative cross-over that means the rally is over.

(2-19-03) The indices  spent the day negotiating with their 20 DMA, while the short term indicators, had a minor pullback as they approached  the zero line. Such action is rather common, after the gains of the previous three days.  Given that the BSEs, and the T.Os are pointing up, we should expect the indices to try to rally further. However, a key development, is that the  magnitude of the current advance as measured by the T.Os and the BSEs, is much smaller than the one which accompanied the rally from the December lows, which suggests that the markets have less internal strength, than they did during the previous rally. If that continues, we should expect the current rally to also be of lesser magnitude than the previous one. In January the SP rallied a total of 65 points,  from  Thursday's lows to today's highs, the SP has rallied a total of 48 points, thus, unless the markets get some renewed  energy over the next 1-3 days,  the SP will run out of steam  within the next 10-15 points. The main culprit is lack of volume, which is bearish. For tomorrow's trading the key thing to watch is support, as long as the indices can remain above it, then there is still hope that the markets can move higher. If support is taken out during anytime tomorrow -or Friday- then the odds would favor that the rally attempt has failed.

(2-13-03) The major indices broke support early in the day as the dollar plunged. Later in the afternoon the dollar recovered, which caused equities to up-tick, which in turn triggered short-covering (from first hand experience we can tell you that we covered about 1/3 of our short positions, and almost everyone we know who is short, was locking in some profits this afternoon!) Therefore, do not put that much weight in today's late recovery, the dollar is still under pressure, and short covering can't sustain a rally for too long.  Although we have pointed out the positive divergences that often lead to a rally, the bottom line is that as of the close today, the three major indices are still below resistance.  As long as the indices remain under resistance the trend is down.  Take a good look at the VIX, it has formed a "bull flag" which implies higher values for the VIX, lower prices for equities.

(2-12-03) The picture did get more bearish today, but as we pointed out on page one, all three of the major indices finished the day right at the next minor support level. If they were to break down tomorrow, the next major support comes at the first downside targets. So far, the indices haven't been to able act upon the positive divergences that have been present, and they are running out of time.  Take a good look at the charts on page one, below minor support we have a clear break down, however, if support holds, we should be prepared about the possibility that the markets are "coiling" ahead of another short-term rally, which can be ignited by any kind of perceived "good news" Bottom line: Hold on to your short positions if the indices break down, if they do not break down, tighten your buy stops.

(2-11-03)  Today the markets rallied up to the resistance and in the absence of any materially positive developments, they reversed to the downside. On the surface that is negative. However, the positive divergences still persist. The Thrust Oscillator for NASDAQ has the exact same configuration it had, the day before the January rally took place. Does that mean the market "has" to rally? NO, the market doesn't "have" to do anything. What it means is two things: 1) do not be surprised if the markets rally seemingly from "nowhere!" and 2) If the markets can't capitalize  on the positive divergences that are in their favor, then they are in real trouble and they are in danger of going into a "waterfall" type of decline akin to what happened in September of 2001, and July of 2002. For tomorrow's trading   we can safely conclude that the picture gets short term bullish above today's highs, and decisively more bearish below yesterday's lows.

(2-10-03) We pointed out in our Weekly report, as well as, in the interview by Mr. Iossif, that positive divergences in the McClellan Oscillators, BSEs, and TOs, were suggesting a short term rally could take place relatively shortly. Today we saw that rally, the question is how far does it go? It should go at least up to resistance at 840 for the SP, and 1320 for NASDAQ. In the absence of any material developments, we would be looking for a reversal near these levels. If there are "positive news" that propel the market above resistance, then the 1st upside targets could be met, but we just can't see where the good news will come from. 

(2-6-03)  The SP broke below 840 and it traded as low as 833, before bouncing up to 838.15  near the close.  For all means and purposes the indices are still in a consolidation phase, and thus the comment we made on 2-3-03 is still applicable " Such consolidation can't go on for ever, we should see a resolution within the next 2-4 trading days.  Consolidations can result either in up, or, down moves. Given the current poor technical ad fundamental condition of the markets, the expectation is that the resolution will be on the downside. However, we also have  several exogenous factors that may influence the markets considerably in the short term. Thus, it is wise  that traders  have alternate plans, and an exit strategy.  The key thing to remember is that the move out of the consolidation zone will have a magnitude between 6% and 9%." 

Notice that the NASDAQ A/D line is one day away from its October lows, while the Cumulative volume is not even close! What does that mean? It means a) the majority of NASDAQ stocks are firmly in a bear market, and on average if you shorted randomly 10 NASDAQ stocks , the odds favored that you would have made money, because MOST are declining, b) although most stocks are losing value, a handful of stocks continue to attract most of the inflows as people keep going back to the same "trusted high octane" names that will lead the "next rally." The outcome of this for the sort-term can be bullish, because it is very easy to push higher a capitalization weighted index like NASDAQ, when there is so much demand for the 15-20 stocks that carry the biggest weight in the index. On  the other hand, for the intermediate term this is rather bearish, because 15-20 stocks can't carry the market for too long.  The bifurcation presents risks and rewards both on the upside and on the downside, thus, it is critical that traders  have alternate plans, and an exit strategy, while intermediate term investors stay on the sidelines for now.

(2-5-03)  The markets rallied early on, only to give up all of their gains later in the day, as we had suspected. They have not broken down yet, but the price action suggests they will. Notice the surge in volume every time the QQQ falls, there is simply no buying interest to support the market. Moreover, the QQQ has not even managed to get to the upper end of the channel, despite multiple rally attempts, which have all fallen short like the one today, indicating a rather weak market. The odds do continue to favor that the resolution of the recent consolidation will be on the downside, but keep in mind that perceived "good news" can generate a sharp but short-lived rally. For tomorrow if the SP finally breaks down below 840, we expect the decline to be contained at the 830-825 level.

(2-4-03) The markets continued  to consolidate within the narrow range they have been in for the past seven trading days. Such consolidation can't go on for ever, we should see a resolution within the next 2-4 trading days.  Consolidations can result either in up, or, down moves. Given the current poor technical ad fundamental condition of the markets, the expectation is that the resolution will be on the downside. However, we also have  several exogenous factors that may influence the markets considerably in the short term. Thus, it is wise  that traders  have alternate plans, and an exit strategy.  The key thing to remember is that the move out of the consolidation zone will have a magnitude between 6% and 9%.  Thus, you may want to go long on an close above resistance, or, short on a close below support. For tomorrow's trading  pay attention to the early action, look out for more rally early on, to close the gap from today, to be followed by a downside reversal later in the day.

(2-3-03) Last week the McClellan Oscillator reached -237, which is a significantly oversold level. Usually, when the markets reach such an extreme level, they rally sharply.  The last two times the Oscillator reached the same level, was in July and again in October of last year, and both times we got a fast and furiously sharp rally. However,  this time the markets did not rally sharply, in fact six trading days have passed since the McClellan Oscillator printed -237, and the major indices have not even been able to get above the first line of resistance. What does that mean? It means one of two things: either the markets suffer from a serious lack of liquidity, combined with very weak internals, OR, a short and sharp rally is coming shortly. In all likelihood, the first scenario is the case, because all the intermediate term indicators have turned negative, pointing to a rather weak market. However, weak markets can still rally for a short period of time, if there is a proper  catalyst. The action of the Thrust Oscillator demonstrates very clearly, that at the present moment the indices can go either way. In October the same combination of price pattern/ T.O. pattern, resulted in another leg down. In January, it resulted in another leg up.  The key thing at the moment in order to avoid unnecessary losses, is not to be presumptuous, just let the market show its real colors.  For tomorrow's trading pay attention to today's highs as pointed out on page one. If the indices trade above today's highs  with positive breadth and up/down volume then they will move higher to test resistance at the "neckline." If the markets begin to decline right from the opening, then we should expect to revisit their recent lows, and actually penetrate them. Please refer to the resistance/support levels given in the table below. "