(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. "

(1-30-03)  The indices traded early in the morning close the "reversal zone" we mentioned yesterday (NASDAQ traded as high as 1363, and the SP traded as high as 866) then they reversed and closed at their lows for the day.  It could be that the indices are staging a short-term double bottom, or, the decline is about to accelerate. The intermediate term indicators are telling us that the larger trend is down, supporting an acceleration of the decline. On the other hand, we also must note -in the interest of objectivity- that there were for positive developments today 1) the indices held at support, 2) the McClellan Oscillators diverged positively although in a minor way, 3) the BSEs diverged positively  although in a minor way, and 4) the T.Os are still rising, although with hesitation. Are these  factors by themselves important enough to be short-term bullish? NO, given that the larger trend, and the internals are quite negative. However, they are important enough to consider the possibility that the market may not be ready to roll-over, yet. Thus, for tomorrow's trading pay attention to the 840 level for the SP, and the 1300 level for NASDAQ, if the indices trade below these levels for 2 consecutive hours, then, the intermediate trend is exerting pressure on the market pushing it further down. However, if these support levels hold, and the indices rally, then they are not ready to roll over yet. The bottom line is, tomorrow the markets can go either way. If they break support, we will add to our short positions, if they rally, we will hedge them, but we will not  cover them.

(1-29-03) The futures -due to foreign selling- were in the red thru-out the night leading to a negative opening. Subsequently, domestic buyers came in -after the indices made contact with support levels-and pulled the indices into the black.  The indices are coming off deeply oversold levels, the BSEs and TOs are  pointing up, and the indices have yet to make contact with resistance, which means there is more room on the upside in the short term. However, foreign selling is a wild card that traders/investors need to be aware off. Just a 5% reduction in U.S. holdings will translate in roughly $250 billion of selling pressure hitting U.S. equities and bonds (foreigners hold roughly $4.9 trillion in dollar-based assets, according to the IMF) Given the low cash levels of U.S. institutional investors, there is not enough capacity to absorb these sales, which can hit the market at any time.  As it stands right now, one should expect the markets to continue grinding higher until they hit resistance. For tomorrow's trading keep an eye in the 870-875 zone for the SP, 8250-8300 for the Dow, and 1370-1380 for NASDAQ. These are the zones from where we can see a reversal.

(1-28-03)  As the short-term indicators were suggesting, today we got a bounce from a deeply oversold condition. The obvious question is again "how far it will go? It should continue higher,  at least to the  resistance levels listed in the table below, unless the President's speech is received unfavorably by international traders, and they sink the dollar and the SP futures in GLOBEX trading over-night, something we have no way of predicting. Make sure you read tomorrow's "Before The Bell" report for complete coverage.

(1-27-03)The markets are rather oversold as measured by every short-term indicator we know off. Thus, a bounce should be imminent.  Having said that, keep in mind that oversold markets can get even more oversold. If the markets bounce here -as the short-term indicators suggest- the question is how far this bounce will go. For that we need to look at the resistance levels listed in the table below. We believe the real test will come at the second resistance levels. If the markets rally and fail at resistance, then we should be expecting the downside targets set in motion by the violation of the neckline in the SP, and Dow charts, to be met. Although we wouldn't be adding to our shorts at these levels, we would not be too aggressive on the long side either. All in all, as we pointed out in our weekly report also, we are expecting a reflex rally, but the technical deterioration is such, that it doesn't warrant -at this point- intermediate term commitments.

(1-23-03) As expected, the markets rallied after having reached oversold levels  which  customarily provide the floor for -at least- a short term relief rally. The question is, is this just a short-term relief rally, or, the beginning of something bigger?  First and foremost, the indices will have to get above resistance (the support line they violated dating back to the October and December lows, see page one) Second,  the Quantifiers will have to turn positive, indicating that the overall technical condition of the markets, has turned positive again. If these two developments take place, it would mean that there is internal strength to fuel further gains. If neither of these developments takes place, then we can conclude that all we are getting, is the customary 1-3 day relief rally from a deeply oversold condition. For tomorrow's  trading pay attention to the resistance levels listed in the table below. Our expectation is that the indices will test them. 

(1-22-03)The markets continued to lose ground while the internals got more oversold, but they did not make contact with their December lows. The momentum is on the downside, thus, we should be expecting a test of support at the December lows, which we expect it to be initially successful, unless the markets are spooked by exogenous events. One thing that we do want to point out, is the return of the same type of trading pattern  that we have observed thru-out intermediate term declines since the bear market started: early rallies that fizzle in the afternoon as sellers take control of the markets. Both yesterday, and today, the markets rallied until the afternoon, and then they fell apart closing at their lows for the day. We have not seen that type of action since last September. If this type of action persists, in our view, that would constitute further confirmation that the intermediate term trend is down.  For now we continue to expect a bounce from oversold levels within the next 1-2 days. Notice how close to oversold territory our short-term   Summation Indexes  have gotten

(1-21-03)This morning, in the "Before The Bell" report we said:

"... If the SP can manage to break above 910, and stay above 910 for 2 consecutive hours, then  the odds favor  a positive close. However, if the SP can't get above 910 and turns back down again, then the odds would favor a lower close, possibly around 890."

The SP got as high as 906 and then it turned down closing at 888, as we had expected. In doing so, it violated -along with the Dow, and NASDAQ- support dating back to the October and December lows (1st downside targets)  The expectation now is that the major indices will visit the 2nd downside targets listed in the table below.  In addition, one more day with action like today's would push the McClellan Oscillators, as well as, our own short-term trading indicators to oversold  levels from which we get tradeable bounces. Therefore, if tomorrow the indices make contact with the 2nd downside targets while the short-term indicators reach oversold territory we would expect a bounce back up to resistance.  Aggressive short-term traders may want to play the bounce keeping stops right under the second downside targets. Having said that, keep in mind that the short-term trend is down, thus, waiting to short the bounce when it fails at resistance, offers a higher  return-to-risk ratio.

(1-16-03) Today the internals continued to erode, but the markets gave up little in terms of points, as of yet. To us that's an indication that the decline has more to go, and that  the 50 DMAs will be tested as early as tomorrow. If they hold, we would expect a bounce starting early tomorrow morning, which should last 2-3 says into next week, and then another -and more serious- decline to commence. Aggressive  traders may want to scalp a bounce from the 50 DMAs on the long side, if it takes place, or, short any break down. However, from a return-to-risk point of view, a bounce from the 50 DMAs that fails next week, will provide a much better entry point on the short side.

(1-15-03) Today we got the decline the odds favored, but more important support indicated as the 1st downside targets in the table below, is still intact. Therefore although a more important top may be forming, the facts do not support such a conclusion as of yet.  The market is news driven, and options expiration is on Friday, thus the risk of getting whipsawed is high. Keep in mind that the 50  day SMA for the SP and the Dow is not too far down from today's closing prices. In the case of NASDAQ, we also have the 200 day SMA right below today's close, thus, a bounce coming from the SMAs  shouldn't be surprising. (DJIA-50DMA: 8605.76, SP-50DMAY:907.82, NASDAQ-50DMA: 1404.21, NASDAQ-200DMA:1428.21) If the 50 day SMA doesn't hold, then look for a further decline to the first downside targets.

(1-14-03) The markets continued to trade in a narrow trading range without either a "break-out" or a "break-down" as of yet. Yesterday's comments and support/resistance levels still stand.  Having said that, we would like to point out that the current chart pattern on the daily charts, 69% of the time, produces at least one down day, following the action we have had the past 4 days. Thus, look out for a possible down day tomorrow. Use the support/resistance levels indicated on the table below, with stops not too far away from those levels. 

(1-13-03)Nothing has changed since Thursday. Friday and again today, the markets continued to trade in a very narrow range which means that they are either forming a top, or, they are "coiling" prior to moving higher. The BSEs and the Thrust Oscillators have turned down, signaling that a  top is being formed, but the  10/20 day Trend indicators are still pointing up, and the SI25s are above zero, signaling that the overall trend is still positive and  that the top may be short-term in nature. However, keep in mind that several major companies will start reporting earnings, and giving guidance for Q1, beginning tomorrow with Intel. Consequently, any number of "good" or "bad" earnings reports can provide the catalyst that will propel the market higher, or, lower. This can be a volatile and choppy week,  making rather difficult to trade. 

(1-9-03) The indices are consolidating between the resistance and support levels indicated on the table below, normally, such consolidation is short-term bullish. However, given that the markets have been mainly news-driven, the "wrong news" can push them lower, conversely, the "right news " can propel them higher. Short-term -by definition- we ought to be neutral as long as the indices remain within the consolidation zone, bullish above resistance, and bearish below support. Use the figures given below to guide short-term trading. For example, if the SP breaks above 933, one can go long, using the 933 level as a stop.  If it breaks below 910, one can go short, using the 910  level as a stop.

(1-8-03)  The dollar lost significant ground which acted as a negative catalyst for stocks. The indices turned down today, but they held above short term support (DJIA: 8500, SP: 900, NASDAQ: 1400) Therefore, the trend is still positive and the indices may be able to turn around tomorrow, or, early Friday and make another run towards resistance. The point we want to drive home is that unless the indices close below support, we have no confirmation that the rally has indeed ended. For tomorrow's trading pay attention to the support levels given in the table below. We will also follow up with intra-day commentary. 

(1-7-03)  Technically the picture is getting mixed, with several of our indicators  at resistance levels, but above zero. In our view, the markets are either consolidating ahead of another advance towards the the 1st upside targets, or,  the rally is running out of steam, as it did last year early in January. As long as the SP remains below 933, the odds favor such scenario, if the SP can close above 933, then the 955-965 level should be tested.

(1-6-03)The BSEs, SI25s, TOs, and Quantifiers are above zero, which means that if the indices close above resistance, the odds will  favor a re-test of the December 2nd, intra-day highs.  However, stocks have rallied in anticipation of the stimulus package, thus, do not be surprised if we see a sell-off after the actual package is revealed. Use the targets given below to guide your trading, keeping in mind that the short-term trend is up.