(4-1-04) The indices  marched on and tested resistance while all of the indicators got almost fully overbought. Tomorrow's  employment report should provide the catalyst for either a retreat -which is our expectation- or a break-out. If we get a pause, given that all indicators have turned positive, as long as they remain positive during any pullback, the pullback ought to be bought.

(3-31-04) The indices made very little progress today while the internals got even more overbought. Given today's positive internals but diminishing value, there is a possibility that the indices may make a run towards resistance, while NASDAQ overcomes 2000 and tests the 2025-2035 zone. However, given the diminishing volume, and yesterday's observations the odds remain better than even that between currents levels and resistance (see table below) the indices will experience a retreat.

(3-30-04) The indices continued to flirt with resistance. The Dow and the SP closed above their respective resistance levels, by a few points, while NASDAQ closed right on it. At the same time we have two interesting developments:

a) The 5 day trading Oscillator is at levels that in the past 18 months have marked short-term tops.

b) The McClellan Oscillators is now overbought and above where it was during NASDAQ's  previous  peak, yet, NASDAQ remains well below that peak. In technical terms this phenomenon is known as "magnitude failure"  and usually it marks a short term top.

The combination of these two developments leads us to conclude that unless we see an immediate acceleration to the upside, the odds are better than even that we will see a retreat.

(3-25-04)  Both the SOX and the NDX gapped up at the opening, and as we had  suggested yesterday,  they set the pace for the rest of the market  to rally strongly towards resistance. Was today the beginning of a new up-leg  within the context of a cyclical bull market that started last year, or, just a "knee-jerk" reaction within  a downtrend?  The fact that the markets were able to capitalize on the positive divergences and rallied suggests that  the bull may still be alive. However, one-to-two day wonder rallies are also the very common in bear markets. Thus, at the moment there isn't enough evidence to make an accurate determination. Today it was a good first step, but now we need to see follow thru, and we need to see  the indices closing above resistance, as it stands right now,  they are still below resistance!  Given today's sharp advance, for tomorrow the odds favor some consolidation.  Those  who opened long positions today, ought to place stops at  the entry levels, thus, ensuring at least break-even. We wouldn't open any new positions until Monday.

(3-24-04)  The indices  continued to consolidate for the second consecutive day.  Out of this consolidation we will either get a break down and a decline  to the first downside targets, OR, the indices will rally  against short term resistance (see table below) NASDAQ provides the clearest illustration of the  position most indices are currently in. In addition, it is at its  200 DMA, and more importantly, when bull market enthusiasts want to demonstrate their convictions, NASDAQ and the SOX are always the  beloved instruments of choice. Today, both NASDAQ, and the SOX , showed the highest relative strength, which may be a sign,  that the bulls are getting ready to make a statement of faith. Consequently, for tomorrow we got to pay attention to NASDAQ, and the SOX.  If NASDAQ falls below 1890, and the SOX index turns down, then the odds will favor a visit to the first downside targets. If the SOX index gaps up, or trades above 472-475, then the bulls are in control, and  they should be able to rally the indices at least up to the first resistance levels.

(3-23-04) Against most odds -given yesterday's  ugly internals- there was no serious follow thru to the downside today, which could be a sign that selling pressure is dissipating, as we suspected yesterday, or, the indices are taking a breather before they move lower. We believe that either outcome is equally probable.  Keep in mind that the positive divergences we talked about are still present, and the indices have not violated support, which means, a rally  from present levels can't be ruled out. 

(3-22-04) Today's decline was quite broad, breadth and up/down volume ratios were horrific, but total volume didn't expand, in fact it contracted, which may be a sign that selling pressure is dissipating. However, that only holds true in bull markets, in bear markets declines go on even on low volume. In any case, given the horrific internals and the fact that the positive divergences didn't provide much help to the markets today, one can not exclude the possibility of a further decline to the first downside targets, before a reflex rally takes place.

(3-18-04) Today's decline can be explained by yesterday's non-confirmation from the Quantifiers. However, the Thrust Oscillators continued higher, and thus, there is a good chance that the indices are in the process of forming a short-term triple bottom (see NASDAQ chart below) Never-the-less, the situation is quite tentative, and thus,  any long positions entered since Tuesday, ought to have stops raised from Wednesday's lows to  under today's lows.

(3-17-04) We got the continuation we were expecting, and the positive cross-over by the Thrust Oscillators suggests that we ought to get further progress in the next couple of days. However, the Quantifier readings didn't  confirm today's price action, and with oil prices at 14 year highs, we must be guarded in our optimism. Any long positions entered since Tuesday, ought to have stops under today's lows.

(3-16-04) Unfortunately, we don't have much to add today to what we said, and observed yesterday. Most of our indicators recorded small changes, and the indices themselves continued to scrape near support. We continue to look for a further bounce into options expiration, but we wouldn't bet the farm on it.

(3-15-04) Today's  action erased Friday's  gains, which were suspect to begin with, given the sharp deterioration indicated by the Quantifiers (see comment for 3-11-04)  Given the current oversold condition, and the futures/options expiration on Friday, another bounce is highly likely as early as tomorrow. However, the technical condition is quite negative, which means, the oversold condition can get even more oversold! We are looking for a tradable rally, but unless we see an actual reversal, we remain in cash

(3-11-04) The sell-off continued, and the positive divergences in the McClellan Oscillators did not hold. Moreover, the Dow 30, and the Utilities broke support once again. At this point, we ought to expect a test of support (see table below) and at the same time, we got to be cognizant of the fact, that all indicators are at the bottom of their range, and unless the markets are heading for a crash, we ought to have a tradable bounce by tomorrow, or, Monday.

(3-10-04)  Today's action was similar to yesterday's, but worse. We got the expected continuation to the downside for the third consecutive day, combined -again- with accelerating negative breadth on both the the big board and NASDAQ. The Quantifiers, the McClellan Oscillators, and the Thrust Oscillators, all continued to decline suggesting that we ought to expect continuation of the recent weakness. However, for the second consecutive day,  there is  a positive divergence between the McClellan Oscillators and price. At the very least, this positive divergence -assuming it holds-  ought to give us a bounce within the next  one to two trading days. How the market goes during the bounce, will tell us whether we have an intermediate term top, or, another intermediate term bottom in our hands. The 10 day Trading Oscillator for the SP, is in the area that in the past 12 months has provided a floor for the SP, however, prior to the last 12 months, it went to even lower levels, before a bounce materialized.  Also, notice that we got a break-out in the VIX, therefore, any bounce in the next 2 trading days, may not be very lasting.

(3-9-04)  We got the expected continuation to the downside for the second consecutive day, combined with accelerating negative breadth on the big board (811 net declines today, versus 501 yesterday) The Quantifiers, the McClellan Oscillators, and the Thrust Oscillators, all continued to decline suggesting that we ought to expect continuation of the recent weakness. However, there is a caveat, notice the positive divergence between the McClellan Oscillator and NASDAQ. If the positive divergence continues to hold, we would expect the six week pullback in NASDAQ to be near its end. It is quite usual for a one-day bounce to take place after the Oscillator violates the zero line, thus, if we get a bounce tomorrow, we wouldn't be surprised, and we wouldn't place much weight to it, we'll draw our conclusions from the action on Thursday, and Friday.

(3-8-04)  Today was a negative day but the indices still managed to finish above support. The negative cross-over by the Thrust Oscillators, combined with  the sharp drop by the Quantifiers suggest that we ought to expect continuation. For tomorrow we need to pay attention to the support levels listed in the table below. If support doesn't hold, then we ought to expect a further decline to the first support levels. Look for a triple bottom by the McClellan Oscillators for an entry on the long side.

(3-4-04)  The indices acted as we expected,  holding today's lows and rallying up to resistance, positioning themselves either for a break-out, or, a rally failure. The employment report due out at 8:30 EST on Friday, could serve as the "appropriate catalyst"  for the market's break-out, or, rally failure. Technically, the internals can support either, although, the SPX/VIX ratio suggests that we can't expect too much on the upside, even if we get the break-out. 

(3-3-04)  The markets sunk early in the session on weaker-than-expected economic data, but  they rebounded  after making contact with support, as investors became optimistic about the employment report due out on Friday, and they tried to position themselves for a rally. Today's choppy and non-sensical action confirms our view that it is premature to get either too bullish, or, too bearish, and the chances of getting whipsawed,  are above average. Never-the-less, today's recovery  also suggests that as long as today's lows are not violated, the indices will re-test resistance, as we opined yesterday. However, something to keep in mind, is the level of the SP/VIX ratio. Once again, it is at the top of its range of the past seven years, which leads us to believe that the immediate upside potential is probably limited, and it doesn't warrant major long commitments. In summary,  traders ought to look for a close above resistance to go long, or, for either a failure at resistance, or, a violation of today's lows  to go short.

(3-2-04)  The indices pulled back from resistance, and the McClellan Oscillators also pulled back to the zero line. However, the Thrust Oscillators continued upwards. The combined action by the indices/T.O.s/M.C.Oscillators, suggests to us that the odds are better than even that in the next two trading days, resistance will be re-tested. Therefore, we believe it is premature to get either too bearish, or, too bullish. Wait to see how the re-test goes. If the indices fail again, it would make sense to go short, if they overcome resistance, it would make sense to go long, until either takes place, cash is the place to be for traders, and oil stocks for intermediate term investors. We remain uneasy about gold and gold stocks.

(3-1-04)  The indices built upon Friday's gains,  and they did so on expanding breadth and contracting volume, which in itself is a contradiction. Moreover, all three indices have just rallied up to resistance, while the McClellan Oscillators indicate that last week's oversold condition is completely alleviated. What to make out of all these developments? In our view, the market -as a whole-is not very stable, the only area of the market that we are definitely positive about, is the oil sector. If the  indices were to overcome resistance, we would become more positive, but for the time being, 10% is all we would be willing to commit on the long side on the QQQ, or, the SPY.