Thursday  5-31-01

The only people "surprised" by yesterday's decline, were the "spinmasters" on CNBC! Anyone following our daily/weekly updates, or, our internet radio broadcasts, knew about what was coming for the past 8-5 trading days! As we said yesterday, we do not have evidence that the market is heading into another multi-week decline, we believe the downside risk is about 5%-7%. At that point, the "optimists" will get back into it, because "hey, do not fight the FED, things will get better in the second half, blah-blah-blah" We would like to point this out: in our weekly update on 4-20-01, we said that paying  $69 for JNPR -because of the above reasons- was plain silly! Yesterday it closed at $41! So, if you bought at $69 -because the "experts" on CNBC were telling you it was a bargain-  it does not matter how much better things will get in the second half, right now they are pretty bleak for you, because you're down 40%.!

Wed.  5-30-01

 For the past 10 trading days we have pointed out the wide divergences between price and virtually every technical tool we use. We have also elaborated -in our weekly reports- extensively on the continuing poor fundamentals. Today's expected further decline, may not be the start of another "horrific" decline, in fact, we do not think it is, but it's another nail to the coffin. For the past 2-3 weeks, "analysts' have been saying that "things can't get worse" well,  SUNW with its warning after the market closed on Tuesday,  proved that  indeed business can get worse! Take a good look at the charts below, and pay attention to the triple tops that have been formed, and contrast that to the triple bottom in April. 

Friday 5-25-01

 Although, "exuberant"  market participants, may drive the market higher into next week, due to their fear that the "train may leave without them" momentum is showing serious cracks. Unless the market makes some real upside progress over the next few days (gains in excess of  4% to 5%) then it may find it difficult to continue.

Thursday 5-24-01

 As we said yesterday, if the markets turn down at this point, the pull back may turn out to be more severe than people expect. On the other hand, we do not have evidence that the up move from the April lows has been completed. The buy/sell equilibrium indexes appear to be stalling after yesterday's acceleration, so, caution should be the order of the day.

Wed. 5-23-01

 The buying pressure seemed to have accelerated  yesterday, although price did not accelerate on the upside. It has been our experience, that when such event occurs, it usually takes place before  a significant move. So, be on high alert! If the market runs out of gas right at this point, it can pull back, more than people expect. On the other hand, if buying accelerates even more, then another 6% to 8% on the upside should be expected.

Tuesday 5-22-01

Yesterday, was a rather positive day all around, 92 out of 100 components of the NDX 100 were up, 357 out of the SP500 and 21 out of the DOW 30! As we said in our weekly report, if the market wishes to go higher, do not fight it! Just be quick to protect your profits. Our 10 day buy/sell equilibrium indexes for both NASDAQ and the SP500 are again in positive territory. However, take a look at the similarities between this rally and last year's rally in June. We keep pointing them out, because we really think the market is  ahead of itself, just as it was last summer. 

Thursday 5-17-01

Our model turned bullish on the DOW from neutral, and it should turned bullish on the NASDAQ and the SP500 today as well, assuming there is follow thru to yesterday's rally. Notice in the charts below, that the Buy/Sell Indexes are still below zero, but one day of follow thru will put them in positive territory. However, we think this leg up will be followed by a not so mild pull back due to the divergences we have talked about extensively in our reports.

Wed. 5-16-01

The market not only got what it wanted from the FED, it even got more, yet it did not respond as enthusiastically as the cheerleaders on CNBC were forecasting for days. We do not have much to say other than this: there has been universal agreement on the Street (even among bears!) that a 50 basis points reduction in interest rates would give the market another push to the upside, our observation of the market over the years has been,  that it stubbornly refuses to do what everybody expects it to do, so do not be surprised if it begins to head south. The charts below look  rather ominous. One can't help but to notice the similarities between now and late January... 

Tuesday 5-15-01

As we explained in exhaustive detail in our latest Newsletter, all of our indicators have turned neutral. Yesterday's action did not produce any meaningful change. However, as the chart below shows, caution should be the order of the day. 

Friday 5-11-01

Anyone who tuned in to our internet radio show on Wed. night, would not have been surprised with the way the market acted on Thursday. We covered in detail how gaps work, and given the market's action over the past few days, we outlined how the market would act if it gapped again. Yesterday's action was a "text book" case on how to trade gaps. Anyway, notice how -on an hourly basis- NASDAQ has formed a huge ascending triangle. Yesterday it fell out of it, which is not unusual. If it finds support around 2100, and then it rallies back into the triangle, then there is a good chance it can finally break on the upside. Otherwise, look for support at point 1, 2 and 3. 

Thursday 5-10-01

Any way you look at these charts, you can't miss the point: momentum has turned down! What holds the markets up, is the absence of a catalyst to bring them down! We would not be surprised to see the markets holding up until the FED's meeting next week, in fact a "triple top" is the most usual formation after a "inverted head a shoulders" bottom. Nevertheless, this is not the point to commit more money, this is the time to take some chips off the table!

Wed. 5-9-01

The momentum summation indexes for both NASDAQ and the SP500 look rather ominous. These indexes are constructed by summing up 12 different momentum indicators, they turn down when a majority of indicators turns down. At the present time 9 out of 12 for the SP500 and 8 out of 12 for the NASDAQ have turned down. Our market timing model is also very close to turning neutral. In conclusion, some caution here is warranted.

Tuesday 5-8-01

Notice how the Buy/Sell Equilibrium Index for both NASDAQ and the SP500, appear to have "stalled." It has been our observation over the years, that when such a minor change takes place, a move in excess of 3.5% takes place within a day or two. Because the index is still in positive territory, the move should be on the upside. However, if it turns out that the move is on the downside, then 3 out of 4 times it has marked the end of the up trend for both the intermediate and the short-term.

Friday 5-4-01

Thru-out the week we have pointed out the negative divergences that have been developing. Is the rally over? Maybe not, both the SP500 and NASDAQ are still above their 10 day mavg, plus today's employment report may give it another push, or, a kick in the head! As long as the SP500 and NASDAQ remain above 1211 and 2006 respectively, the bulls still have a case from a technical point, although a weak one, given the double tops that have formed. However, from a fundamental point, current prices for NASDAQ are absurd! 

Thursday 5-3-01

We do not mean to sound like a "broken record" (or should we say "broken CD?") but the divergences are getting more pronounced as the market moves higher. In addition, the technical similarities between the current rally and the rally that took place last year (June-August) are eerily striking! Although, the market may have more to go, consider this : BRCD now has a p/e of 120 times trailing earnings, who says sanity has returned on Wall Street? We continue to have very tight trailing stops in our long positions, but we would not chase the market. The SP500 is closing in on the "declining tops line" that has been in effect since September, we doubt it will get thru on this run, but with so much bullishness around, it will try again.

Wed. 5-2-01

As we said over the weekend, market participants are convinced that there is nothing ahead but good times, and they are pushing the market higher. Although, we've been on a "buy" signal since 4-12 (see April Newsletter) we are getting nervous because negative divergences are appearing as the markets move higher (see charts below) In addition, the "star" of the them all the venerable DOW, is rallying strongly despite the fact that oil prices are getting awfully close to $30.00 per barrel, and it is highly possible that oil may break above the short-term downtrend at $31.00. Historically, the DOW and oil have an inverse relationship, so sooner or later, one of the two will have to surrender! Moreover, pay attention to the 10 day Buy/Sell Equilibrium for NASDAQ. It dipped below the zero line, and now it is attempting a "snap back" If it penetrates the zero line with conviction then the rally is good for another 200-250 points. However, if there is no follow-thru today, and the index falls further into negative territory, then the rally that started on 4-4-01 may have run its course .