5-30-02

Charts:    Yesterday we said:  

"Today- Wednesday- we saw further deterioration in the technical condition of the markets -as illustrated by the quantifiers, but we did not get a commensurate deterioration in price. Usually, such "unsynchronized" action means either a) the markets will have a small 1-2 day bounce before the decline resumes in earnest, or, b) price will catch up with the technicals as early as tomorrow.  If we get a "pop" early in the morning, pay attention to the 1070-1075 level for the SP500, and 1650-1665 for NASDAQ. If any intra-day rally stalls at these levels, we will see another down day tomorrow. On the other hand, if the markets fall early in the morning, but by 11:30 AM PST the SP500 has held above 1060, and NASDAQ above 1590, then the market will rally into the close. " 

Today -Thursday- the markets fell early in the morning, they held above the levels we indicated yesterday, and as we had predicted they rallied into the close. We do not see that late rally as anything to get excited about. The technical condition of the markets suggests that any rallies will be short-lived. We got the BSEs in negative territory, the trend indicators declining, and the quantifiers deeply in negative territory as well. Our intermediate term forecasting model also went on a "SELL" signal today, as we indicated in our email sent at 9:20 AM PST today. Keep in mind that our timing signals are  based upon the risk currently in the market, non-withstanding rallies that may occur. The message is for intermediate term investors  to sell into these rallies, opposed to buying into them.  (New subscribers are encouraged to listen to the tutorial about our intermediate term market signals) 

We suspect that today's bounce is a part of that 1-2 day small advance we talked about yesterday, which tends to be customary during the last day of the month, and the first 2-3 trading days of the following month. For a confirmation that this rally pattern will hold, we need to pay attention to the action by the SP500 tomorrow. If it rallies and  holds above 1065, then the next upside target should be the 1075, beyond that comes 1095. 

SPDRs/Sectors:   Notice that for two consecutive days investors have been moving in "defensive issues" such as hospitals. If you recall we saw the same action on 1-10-02, 1-1-02 and 1-14-02 (see archives) At the time we made the following remarks :

"1-10-02
SPDRs/Sectors: Today we saw investors moving into defensive issues such as Healthcare and Reits. One day though does not make a trend.

1-14-02
SPDRs/Sectors: Today -just like last Thursday- we saw investors moving into defensive issues such as Healthcare and Reits. Keep in mind that we have seen the exact same behavior by investors prior to all tops in tech the past two years. 

1-16-02
SPDRs/Sectors: Defensive sectors such as Gold and Hospitals continued to rise. We have pointed out that in the last 24 months, every major decline in tech has been preceded by positive action in defensive issues."

As you remember, January marked an intermediate term top for the Dow, the SP500 and most importantly NASDAQ. Thus, we should pay attention to this development, and the potential message that once again it may be sending.

5-29-02

Charts:    

Today- Wednesday- we saw further deterioration in the technical condition of the markets -as illustrated by the quantifiers, but we did not get a commensurate deterioration in price. Usually, such "unsynchronized" action means either a) the markets will have a small 1-2 day bounce before the decline resumes in earnest, or, b) price will catch up with the technicals as early as tomorrow.  If we get a "pop" early in the morning, pay attention to the 1070-1075 level for the SP500, and 1650-1665 for NASDAQ. If any intra-day rally stalls at these levels, we will see another down day tomorrow. On the other hand, if the markets fall early in the morning, but by 11:30 AM PST the SP500 has held above 1060, and NASDAQ above 1590, then the market will rally into the close.  

PLEASE NOTICE: As of today's closing price on the Dow we are changing our position on this index from previously  "BUY"  to "NEUTRAL." 

5-28-02

Charts:    Today's action has to be worrisome to the bulls, but tomorrow's should be more telling. We have pretty much all of our indicators below zero and declining, which suggest  lower prices. On the other hand, we got the McClellan Oscillators above support, we got low bullish sentiment among individual investors -as we noted in the weekly report- and the market closed on  a  high  put/call ratio (see next page) which suggest a bounce! Thus, for tomorrow we got to pay attention to today's lows. If they hold tomorrow, then we should get a bounce for a couple of days, if they do not, then we would expect the SP500 to test 1060, and NASDAQ to test  1600, if not 1560.  

PLEASE NOTICE: Our expectation is that the Dow will hold support at the 9950 level, unless there are external developments that cause the market to tank. If it does not, our position will change from a "BUY"  to "NEUTRAL." 

SPDRs/Sectors:   Gold stocks have  broken out, next stop for the XAU will be the 90-92 level.

5-23-02

Charts:    For two days in a row the bears were unable to push the markets below support, thus, the threw in the towel and covered their position in the later part of the day, resulting in positive closings for the day. Although, short covering has been the source of the advance in the past two days, it should not be viewed all that negative at this point. First of all, it is quite understandable that real buying won't take place until after Memorial day weekend -if it does take place after all. No trader wants to go home for a long holiday weekend, either short, or, long the market.  Thus the bears are covering their positions, and the bulls are waiting until next week to commit. The important thing is that the market has not broken down. We are still getting higher lows, and the short-term  uptrend is holding well. Can all that be reversed next week? Yes it could, but let's focus  what is happening right now, opposed to what may happen nest week. For now the market has a positive posture, and unless it gets a real ugly preliminary GDP report tomorrow, or, some exogenous event adversely impacts the market, we should see higher prices into early next week. We should see 1730-1740 in NASDAQ, and 1112-1115 in the SP500.  We also want to reiterate that at this point, any advance that takes place, is nothing more but a trading rally. We do not believe long/intermediate investors  should either be losing their sleep over it, or, they should be involved in it. 

PLEASE NOTICE: Our expectation is that the Dow will hold support at the 9950 level, unless there are external developments that cause the market to tank. If it does not, our position will change from a "BUY"  to "NEUTRAL." 

SPDRs/Sectors:   Gold stocks have  broken out, next stop for the XAU will be the 90-92 level.

5-22-02

Charts:    Yesterday we said:  

"We continue to view today's decline in the same light, unless proven otherwise. All the indicators, including the quantifiers, are in formations  consistent either with a "short-term" top, or, with consolidation. By tomorrow we should have the answer. If the rally is to resume the markets must begin to rally sometime tomorrow, either from today's closing levels, OR, in worst  case, from around the 9950 level  for the Dow, the  1625 level for NASDAQ, and the 1068 level for the SP500. If the markets close below the above mentioned levels, then in all likelihood they will revisit the lows of two weeks ago, and the bullish scenario should be considered dead."

Today we did get the rally. However, it came late in the day based on a false rumor that Osama Bin Laden was captured! In addition, the 10 day trend indicators turned back down again. Unless we get acceleration of the advance based on some solid reasons, then, the possibility that the markets are about to start another leg down is very real. If they close for the week below today's lows, we would get very concerned. One thing to consider is this: who in his/her right frame of mind would want to be long the market, going into a three day weekend, when suicide bombings are again taking place in Israel, while India and Pakistan have been exchanging artillery fire for five consecutive days? 

PLEASE NOTICE: Our expectation is that the Dow will hold support at the 9950 level, unless there are external developments that cause the market to tank. If it does not, our position will change from a "BUY"  to "NEUTRAL." 

SPDRs/Sectors:   Gold stocks appear to be breaking out, next stop for the XAU will be the 90-92 level.

5-21-02

Charts:    Yesterday we said:  

"Today's decline should not come as a surprise to any of our subscribers. The question is what happens next! All the sings point to a bullish consolidation. However, bear markets are notorious when it comes to fooling people. If the markets hold  support then the rally will have legs. On the other hand, if they do not, we can see a swift decline back to the lows of two weeks ago. We continue to build "market neutral" positions that we believe will bear fruit, no matter which way the markets go while keeping enough cash on hand to double up on positions, once the markets show their true intentions. We want to be positive because the markets have been acting positively, but we also want to be cautious because we believe the bear market is not over yet. "

We continue to view today's decline in the same light, unless proven otherwise. All the indicators, including the quantifiers, are in formations  consistent either with a "short-term" top, or, with consolidation. By tomorrow we should have the answer. If the rally is to resume the markets must begin to rally sometime tomorrow, either from today's closing levels, OR, in worst  case, from around the 9950 level  for the Dow, the  1625 level for NASDAQ, and the 1068 level for the SP500. If the markets close below the above mentioned levels, then in all likelihood they will revisit the lows of two weeks ago, and the bullish scenario should be considered dead.

PLEASE NOTICE: Our expectation is that the Dow will hold support at the 9950 level, unless there are external developments that cause the market to tank. If it does not, our position will change from a "BUY"  to "NEUTRAL." 

SPDRs/Sectors:   Gold stocks appear to be breaking out, next stop for the XAU will be the 90-92 level.

5-20-02

Charts:    Today's decline should not come as a surprise to any of our subscribers. The question is what happens next! All the sings point to a bullish consolidation. However, bear markets are notorious when it comes to fooling people. If the markets hold  support then the rally will have legs. On the other hand, if they do not, we can see a swift decline back to the lows of two weeks ago. We continue to build "market neutral" positions that we believe will bear fruit, no matter which way the markets go while keeping enough cash on hand to double up on positions, once the markets show their true intentions. We want to be positive because the markets have been acting positively, but we also want to be cautious because we believe the bear market is not over yet. 

SPDRs/Sectors:   Gold stocks appear to be breaking out, next stop for the XAU will be the 90-92 level.

5-14-02

Charts:    

Yesterday we said: 

"The intermediate trend remains negative, however, for the short term we see  positive signs under development. Today's action certainly helped to make those positive developments we mentioned earlier in the report, stand out. The key thing over the next 1-2 days is whether the advance gains momentum, or, fades  as the markets approach last Wednesday's highs.  Given the volatility that we have seen over the past two weeks, we continue to believe that the best place to be, is mostly in cash, thus able to take advantage of any opportunities availed by the market. Keep an eye on the 1089-1090 level in the cash SP500. If the SP500 crosses above 1089-1090, we will see program buying coming in, pushing the markets higher."

Today -Tuesday- we saw further improvement, which  helped push the quantifiers into "neutral" territory, a prerequisite to turning positive. The current chart formation, suggests that we should see a pullback towards yesterday's highs (NASDAQ:1650, SP500:1074) and then a push towards the upside targets indicated by our forecasting models as discussed in May's newsletter. Should things unfold this way, it will be a classic text book advance, and it will provide a low risk entry point for both NASDAQ and the SP500.

Please note that our timing model has given a BUY signal on the Dow, as of today's close. It still remains neutral on NASDAQ and the SP500. The signal will remain in effect as long as it remains above support, with a target of 10650-10700.

SPDRs/Sectors:   We view further weakness in hospital stocks as a buying opportunity.

5-13-02

Charts:    

The intermediate trend remains negative, however, for the short term we see  positive signs under development. Today's action certainly helped to make those positive developments we mentioned earlier in the report, stand out. The key thing over the next 1-2 days is whether the advance gains momentum, or, fades  as the markets approach last Wednesday's highs.  Given the volatility that we have seen over the past two weeks, we continue to believe that the best place to be, is mostly in cash, thus able to take advantage of any opportunities availed by the market. Keep an eye on the 1089-1090 level in the cash SP500. If the SP500 crosses above 1089-1090, we will see program buying coming in, pushing the markets higher.

SPDRs/Sectors:   We view further weakness in hospital stocks as a buying opportunity.

5-9-02

Charts:    

Yesterday we said: 

"... we got the move, and as we had suspected it was ignited by Cisco's  earnings. We need to keep in mind two things: a) all the indicators are still below zero b) the markets rallied up to resistance.

Therefore, by definition, we can't declare that  either the short, or, the intermediate  trend has changed from negative to positive. If there is follow thru tomorrow, then we would expect -at least- the short term trend to change. However, keep in mind that the sharpest rallies, take place in the midst of raging bear markets, and they are short lived. They are strong enough, and last just  long enough, to convince market participants that a new "bull has arrived" and soon after they turn back down again, like they did just  a few weeks ago. It never pays to fight the market, but also it never pays to follow the herd. Thus, if you are wondering what to do, we suggest nothing, until the indicators turn positive, indicating that indeed the climate has turned from negative to positive."

Today -Thursday- the markets retreated, and it could be that the rally has already topped out, or, that the market consolidated in advance of attacking resistance levels, which must be overcome in order for the current market climate to change from negative to positive. Given the size of yesterday's advance, one would expect that the market will show some more fighting spirit, but we also need to keep in mind that bear market rallies stop as abruptly as they start. Therefore, it makes sense at this point to be reactionary opposed to anticipatory and remain in hedged positions until the smoke clears. 

SPDRs/Sectors:   Pay attention to gold stocks, if the XAU closes above its recent highs, the 80-82 level will be the next target.