(1-29-04)The McClellan Oscillators fell even further, while the SP and NASDAQ tested support. This combination does suggest that we ought to expect a bounce within 1-2 trading days. However, there are two things that we find troublesome a) virtually everyone is ready to buy the "dip" b) the volume the past 3 days increased substantially. Usually, such combination results in failed rallies. Investors who initiate longs playing  any bounce that develops, should have stops under today's lows. 

(1-28-04) Today the first downside targets were easily violated, and at the same time the McClellan Oscillators also violated the zero line, and trend-line support,  suggesting that more weakness should be expected. However, we also need to note that the McClellan Oscillators are not too far away from their low end of their range. Thus, a further decline to support or, even to the first downside targets, in combination with a further decline of the McClellan Oscillators to the -200 level, should yield a tradable rally. The strength of that rally should reveal a lot about the direction of the market for the intermediate term.

(1-27-04) As you know in the Monthly Report we expressed the opinion that we expected a "pause" to take place  in the 1140-1175 zone for the SP, and in the 2160-2190 zone for NASDAQ. Today's failure to follow thru with an advance towards the upper resistance targets, and subsequent reversal to the downside, may signify that the "pause" is already in play. However, when examining all the evidence, it points out to more choppy action. Notice that the McClellan Oscillators are near short term support, thus, another reversal to the upside tomorrow can't be ruled out. For us, the key development would be a  violation of the first downside targets. As long as the indices hold above them, the bulls are still in charge.

(1-22-04) For the second consecutive day NASDAQ -lead by the Semis- pulled back again, while the senior sector held up relatively well. The resistance levels we have listed in the table below, have proven tough to overcome so far, however, until the up-trend is broken, by definition, the trend is still up! Given the current chart pattern, from a technical point of view, it would be more in-line with previous observations, if the indices tried to take out resistance one more time. As long as the indices are above support we ought to remain positive, but  cautious. The market is over-extended and no one can know if the next pullback will be of the 2%-3% variety, or, of the 8%-10% variety. 

(1-21-04) NASDAQ -lead by the Semis- pulled back today, while the senior sector marched ahead. They are just a few points below resistance, and given the continuous strength in breadth and momentum, the odds are better then even that they will challenge it. If resistance is overcome, then we would look for a further advance to the first upside targets. We continue to expect a pullback, coming between the resistance levels, and the first upside targets listed below.

(1-15-04)  The markets sold off early in the morning, and then spent the rest of the day advancing. The price action of the past six days has many characteristics of a consolidation, prior to a break-out.  However, until the indices  close above resistance, we  don't have  one!  The odds -based upon most of the internals- do favor higher prices for  the next few  days, but the continuous negative  action by the Thrust Oscillators,  suggests moderation in expectations.   

(1-14-04)  Today's  price action  was in line with our expectations, the key thing now is follow-thru. If there is follow thru and a close above resistance, then look for the first upside targets to be met within 2-3 trading days.  However, as of today,   earnings reports have started to be released in earnest, and thus, the markets ought to be expected to be reactive to negative, positive, or, in-line  reports, to the extend that the  earnings are not fully reflected by price.  Consequently, earnings releases ought to provide the catalyst for  either follow thru tomorrow, or, a failure and another reversal. Technically, the market  is capable of doing either.  For tomorrow, support and resistance, ought to be our objective "line in the sand."  We do have a modest negative bias for tomorrow, due to the fact  that both  Thrust Oscillators are pointing down.

(1-13-04)  NASDAQ started to decline right at the opening, the Dow took out yesterday's lows, and as we had expected, we ended up with a down day.  No one can deny that the chart pattern shows a minor double top, and  if that is the case we should get more downside action tomorrow. However, there are two data points  telling us, not to be surprised if we don't get more follow thru to the downside tomorrow. The NYSE McClellan Oscillator is at 15.78, very close to the zero line, which quite often produce a reflex rally. In addition,  the Quantifiers today  lost very little ground.  Historically, when the magnitude of the change in the Quantifiers, significantly lags the magnitude of the price move,  the probability of a  price move  in the opposite direction the next day, stands at 68.23%. Consequently, if we see the markets rallying in sync right from the start, the odds will favor an up day by the close. Of course, if the opposite happens, and today's lows are taken out, then  in all likelihood, we'll end up with a down day.

(1-12-04)  In the "Weekly Report" we pointed out, that the indices were at resistance, and overbought, meaning it  would  be perfectly normal  to see a pullback. At the same time, we brought to your attention, that our observation over the years, has been that strong markets, that manage to break thru resistance, coming out of a very overbought condition, have a tendency to rally another 3.5%, before they pull back. NASDAQ appeared to be on that type of path today, while the Dow, appeared to be on the opposite path. Ultimately, they will go the same way, but as of the close today,  neither outcome can be  dismissed.  If NASDAQ begins to decline right at the opening, and the Dow takes out today's low within the first hour, then the odds will favor a down day, by the close. On the other hand, if NASDAQ rallies from the opening, and the SP trades above 1134-1136 during the first hour, then the odds will definitely favor an up day, by the close.

(1-8-04) We don't have much to add today. The overall technical remains robust and positive. Having said that, we need to keep in mind that the indices are within a few points from resistance, and given the overbought level of the markets, the odds do favor a pullback between resistance and the first upside targets. 

(1-7-04) The indices inched a bit closer to resistance while every indicator known to man and woman, has gotten  even more stretched. For example, the ratio of VIX to the SPX, is at the same level it was in July 1998, January 1999, March 2000. There have been only two times in the history of the VIX that the SPX/VIX ratio has gotten higher. The Consensus Inc., poll showed 84% bulls, while the AAII has 62.5% bulls, and only 13.5% bears. When we put it all together, our view is,  the odds are better than even that the indices will retreat once they reach resistance. The markets can certainly move higher, but common sense tells us that the risk/reward ratio  on the long side at this point, is  rather small.

(1-6-04) The indices are pretty close to resistance, while most indicators are pretty close to the top of their most recent range. Take a look for example at the SP500 relative to its 200 DMA, there has been only one reading higher then the present one, since March of 2003. Consequently, we must  continue to expect a pullback to occur either at resistance, or, at the first upside targets, and then we'll re-evaluate  when that occurs. 

(1-5-04) Today NASDAQ  overcame resistance at the black line, and now we got to assume that it is headed for the next  target in the 2070-2090 zone. In that case we would expect the Dow to reach 10650, and the SP to reach 1034. At the same time, all of the short term indicators are near the upper end of their range, thus, we should also expect a pullback to occur either at resistance, or, at the first upside targets (see table below)