(7-31-03) The bulls ran the market in the early going marginally penetrating resistance, and then, one hour before the close sellers came and brought rain into the bulls' parade. The price was disappointing -from the bulls' point of view- especially because it came after the release of "good news." However, it is not too unusual for price to pull back, and then to re-surge tomorrow. The real important development would be if after today's reversal tomorrow we get a continuation to the downside and a close below support, in that case, the bulls will have plenty to worry about and we will go home for the weekend NET SHORT. If the bulls can re-gain control and close the market above today's highs, we will go home for the weekend NET LONG, and we would expect further gains next week.

(7-30-03) The markets continued their trendless dance to nowhere, frustrating both the bulls and the bears. However, we need to note that the chart patterns that we have in all the major indices,  2 out of 3 times  have a bullish resolution.  That doesn't make us bulls, we are still neutral until we have a break out, or, a break down, but it does serve as a warning sign not to get too bearish until the markets  close below support, which have not done yet.

(7-29-03)  Today the markets got blindsided early in the day when the Consumer Confidence Report showed for the second consecutive month that consumers are losing confidence, instead of gaining confidence.  After the initial shock, the markets re-grouped rallied, and then near the end they turned back down again. Technically speaking, today, there was very little change in all of our indicators, which means there was no deterioration, or, improvement under the surface. However, price -once again- remained resilient. It looks like the bulls came to the market's rescue, betting, that the rest of the economic reports coming out this week will be positive, and thus, today's disappointing consumer confidence report will be deemed unimportant in the grander scheme of things.  One can argue that if a disappointing report does not hurt the market, then a bunch of encouraging ones can only help it. We strongly suggest to pay attention to price action,  As long as the SP remains below 1005, the bears can breathe easily, however, the environment can get quite suffocating for them on a close above 1015. The same -but opposite- holds true for the bulls. They can remain confident if the SP remains above 993, but they should temper their tone on below 993, and they should definitely get worried on a close below 983. 

(7-25-03)In the weekly report we said: "... For next week, we need to pay attention to the 1005-1015 level in the SP. A continuation of Friday's rally and a close above 1015, should give buyers more confidence to return back to the market causing a break out which -if it is real- can take the SP to 1068. If the SP, finds intra-day resistance at 1005 early in the week, and fails to close above 1015 sometime during the week, it should be taken as a sign that Friday's rally was a one day affair, and we should expect the markets to return back to support levels." 

Today's price action was lackluster but there was strength under the surface, suggesting that we could still see higher prices. However, the key thing is whether resistance can indeed be overcome. As long as the SP remains below 1005, the bears can breathe easily, however, the environment can get quite suffocating for them on a close above 1015. The same -but opposite- holds true for the bulls. They can remain confident if the SP remains above 993, but they should temper their tone on below 993, and they should definitely get worried on a close below 983. We do not have much more to add tonight, other than get bullish above resistance, and bearish below support, relax and do nothing in-between!

(7-24-03) The indices rallied up to resistance and then fell apart. As we said yesterday, if the markets are topping out here, this is exactly what we would expect. So, are the markets topping out? Objectively speaking we need to point out  three facts:

a) The price action today was consistent with a topping process, which is bearish.

b) Breadth did not confirm the reversal in a convincing way, down issues outnumbered up issues only by 100, which is bullish.

c) Although price was turned down at resistance, it is till holding above support which is neutral, to bullish.

So, going forward the key thing is whether the decline accelerates tomorrow, or, Monday and key support at 972 for the SP, and 1675 for NASDAQ, are taken out on a closing basis. The odds point that way, but with many cross-currents at play, another run towards resistance can't be ruled out. 

(7-23-03) The indices continued their bounce from Monday's oversold levels, with NASDAQ, the Dow Industrials, and Dow Transports displaying potentially bullish chart formations, while the SP is displaying a potentially bearish chart formation.  Overall we view the picture as neutral, and the dichotomy between Dow/NASDAQ and the SP means that the markets can move either way, thus, it makes no sense to take a large anticipatory position at this juncture. Having said that, we also need to make one additional point: if the markets are topping right here, we would expect the bounce from Monday's lows to be as weak as it has been, and we would expect it to end today, or tomorrow -as we mentioned in the weekly report-  with the down phase accelerating some time Friday, or Monday. Therefore, if the indices fail to move higher tomorrow, or, the bounce continues to be weak, that should be taken as a red flag for the bullish case. It should be noted that the dollar plunged against the euro, and gold soared, while bond yields remain at their highest in 12 months, one has to wonder how long stocks can hold up, if the background continues to be that hostile.

(7-22-03)  Yesterday's lows held and the indices rallied towards resistance, keeping the bullish case alive, however, the real test will come tomorrow when they come in contact with actual resistance. Given how oversold the indices are -as illustrated by the McClellan Oscillators- the markets could rally further. Therefore, if resistance is taken out tomorrow, short term traders could take this as a sign to try small long positions for a run towards the first upside targets. On the other hand, a clear failure at resistance tomorrow, should be taken as a sign to  lighten up on longs, and establish, or, add to existing shorts. There isn't really much more to add today, other than pay attention to support/resistance levels listed in the table below, in order to take trading positions. 

(7-17-03) The market "tanked" while for the first time since the March lows we had three consecutive days of breadth with a ratio greater than 2:1 favoring the losers, coupled with increasing volume for each day of the last three. The sharp deterioration in the internals suggests that we ought to expect more weakness in the intermediate term, but given the oversold levels of the McClellan Oscillator, we also ought to expect a bounce in the short-term, meaning in the next 1-2 trading days, especially if the indices reach the first downside targets.

(7-16-03)  The indices  pulled back modestly as we had expected, and now we got to see whether the entire pattern will be repeated (see our commentary on page 4) which means we will get a rally over the next two days, or, the market will just tank from here. Notice that the SP made a lower top, which may be signaling that the broad market has indeed run out of fuel, and there is no room left on the upside. For now we'll use the support/resistance levels as our guide.  

(7-15-03)  The indices gapped up at the opening, and then spent the rest of the day pulling back, to finish the day  with minor losses. today's action follows the script we discussed yesterday, and if continues to do so tomorrow, we should see another mild weakness to be followed by a rally up to channel resistance by Friday. The most important event of the day -in our view- was the severe decline in bonds, and the sharp rise in yields. Although we do believe that the bonds will experience a short term bounce from their deeply oversold condition -which is the reason why we bought TLT today- it appears that the trend in yields has been reversed. Such event, will impact housing and big-ticket item sales, and it is something that warrants plenty of attention going forward.

(7-9-03) The indices did show some signs of weakness, but whether the weakness represents a "pause" or the beginning of an intermediate term top -as many believe- is a whole different story. Notice in the chart below that judging by price alone, at this point it could turn out to be either just a pause like it was in late May, or, it could turn out to be a double top. To get a better clue we need to turn our attention to the Thrust Oscillator.  The TO is flattening, which means we can expect either a short-term pullback, or, an intermediate term top. Notice that since the March lows, similar action by this indicator has signaled a 2-3 day pullback, followed by another advance, which was in turn followed by a more severe decline. So, at the very least we got to expect a pullback, if support doesn't hold -like in the previous two cases, that should serve as a clue that we are not getting a mere short-term pullback, but we have experienced an intermediate term top. For tomorrow's trading pay attention to the Dow and the SP, we got intra-day support at 9150 for the Dow, and at 996 for the SP. If they break down liquidate 1/3, or, 1/2 of long positions, and wait to take further action based upon how the indices behave at the first downside targets. 

(7-8-03) The Dow and the SP showed some signs of fatigue and weakness, never-the-less, NASDAQ marched ahead, once again providing leadership and suggesting that our target of 1765-1780 will be hit. In such case we would expect the Dow and the SP to follow -perhaps reluctantly- and to test their respective resistance levels, as well.  We ought to be cognizant that volume has been lagging, the McClellan Oscillator is still in negative territory, and the equity put/call ratio is getting rather low, however, price has not turned down yet, which means the rally may end soon, but it hasn't yet! Use trailing stops to lock in gains in your long positions. If the market is about to top, we wouldn't expect it to happen, until later in the week.

(7-7-03) The indices mounted an impressive performance today, with NASDAQ overcoming resistance, while the Dow and the SP finished marginally below. We continue to remain positive on the market until price turns down which it has not yet. Having said that we do want to emphasize two things a) volume shrank considerably today, b) the NYSE McClellan Oscillator continues to be in negative territory and the Summation Index continues to decline. These are warning signs, but until price heeds to the warnings -by turning down- there is no good  reason to be bearish, given that all of our indicators are in positive territory. Use trailing stops in your long positions and let the market take those stops out. 

(7-2-03) Today we got follow thru accompanied by good breadth, and volume. NASDAQ appears ready to take out resistance at it most recent high at 1685, while the SP and the Dow are lagging slightly. The internals suggest that we should expect higher prices, but given that tomorrow is a half day characterized by low volume, anything can happen. We remain  remain positive, at least for the short term, and we are looking for the Dow and the SP to also overcome resistance and challenge the first upside targets. Having said that, keep in mind that the McClellan Oscillators are still below zero, meaning all the progress can easily be reversed next week.

(7-1-03) The indices rallied after violating support briefly, staging a "one day reversal." How significant was today's action? Objectively speaking, at this point, we do not know, and neither does anyone else, especially those who claim that they do! Joking aside, the point we want to make is this:  the action by the Thrust Oscillator, and the Buy/Sell Equilibrium Indexes, combined with the oversold levels of the McClellan Oscillators, highly suggested that the indices would bounce, even if they are ultimately going lower. Bounces within downtrends are insignificant events, key reversals are not. We won't know if today's action was just a bounce within a downtrend, or, a key reversal until the indices close above resistance, which by definition, would terminate the downtrend. Today's action should be taken for what it was, a good first step towards the resumption of the up-trend, what is important next, is that we get follow thru, and the indices close above resistance. If the indices can't close above resistance, they will go back down again to test support at today's lows. Therefore, if you opened minor long positions today, it would make sense that you place your stops above your entry point, so, even if today's action turns out to be a head fake, you won't lose anything. Better yet, if the indices overcome resistance, add to today's long positions, as you know we bought IBB today at 65.96, and now we have our stop at 66.05. If there is follow thru tomorrow, we'll add to the position, and if there is not, we should be able to get out of it with a gain of 10 c per share, before commission costs. Bottom line: today's action was a nice start, but in order to morph into a sustainable rally, the indices need to close above resistance, if that doesn't happen, the nice start will turn out to be just a false one, which happens frequently during intermediate down trends.  (6-30-03)  For the fourth consecutive day the indices continued to consolidate in a rather narrow range, with support at the bottom of their rising channel, and resistance at the highs of last week. Obviously the indices can't continue to trade in such a narrow range much longer, we should expect either a break-out, or, a break-down before the end of the week. It appears that the scale is slightly tilting towards the bulls, given that channel support has held for four days, the Thrust Oscillators have turned up, and the Buy/Sell Equilibrium indexes also have turned up. However, the key thing is that the markets must take advantage of these positive developments and rally, if they don't,  then the only other outcome would be a violation of channel support, and further decline to the first downside targets, and most likely the second ones, too. Look for penetration of either support, or, resistance to establish trading positions, short, or long.