(11-24-03) The indices rallied sharply, while all of our indicators also turned up, suggesting that we ought to see continuation. We really don't have much more to add today, other than, if there is no continuation in the next two days, it will be a clear sign that the markets are not getting a continuous infusion of liquidity, and thus, today's rally was just a one day event.

(11-19-03) The markets rallied from the levels that the bulls have been able to make a stand since March. The question is; how much firepower they have -in terms of available liquidity for stock purchases- Do they have enough to support a new up-leg, or, do they have just enough for a bounce? We will find out shortly. If the indices are about to start a new leg to the upside, they should be able to overcome resistance at their most recent highs, with ease. Otherwise, we'll see a failure in the 9750-9800 zone for the Dow, in the 1052-1054 zone for the SP, and in the 1945-1955 zone for NASDAQ. To put it clearly, the rally will fail BEFORE the indices make contact with their respective first upside targets, shown in the table below.

(11-18-03) The markets sold off modestly, due to investors' heightened concerns about the simultaneous strong price action by gold and oil, and the dollar's penetration of support. You may recall that in our weekly report, we discussed this matter in detail.  For the moment there are two areas that investors need to focus, in order to avoid getting confused by all the noise. First, with the exception of NASDAQ, all the other indices have not violated support, which is still positive. Second, in order to get a decline of larger magnitude and duration than the ones the market has treated us with since March, the background must cease to be bullish. Right now all the indicators are in the vicinity from which the bulls have been able to assume complete control of the market, and drive it higher. Therefore, if the "environment" is still bullish, then the bulls ought to be able to gain control of the market and drive it higher once again. However, if the "environment" has changed, then the bulls will be unable to take over, and drive prices higher. So, in the next 2-4 trading days, watch to see if the markets  will act in the same manner that they have acted, every time the indicators reached the same levels since March. If the first downside targets are not reached, or, penetrated and the markets turn around and begin to rally on strong volume and breadth, that should be a clue that NOTHING HAS CHANGED, the bull is still alive and well, and we just had another 3-4 day decline, enough to get people excited about the return of the bear market, only to see higher highs soon after! On the other hand, if the first downside targets are taken out solidly, and the markets are unable to muster a rally accompanied by strong breadth and volume -as it has been the case since March- then that should be our clue that SOMETHING HAS CHANGED, the bears finally  gained control. 

(11-17-03) The indices gapped down at the opening, violating their 21 DMAs, but they rallied strongly after making contact with their 50 DMAs, managing to close in "no man's land" above the 50, but below the 21 DMA.  Moreover, we don't have yet either a break-down (see charts on page 1, channel support is still holding) and obviously we still don't have a break-out either. Thus, the "uncoiling" and the break out of the apex that we talked about in the weekly report, has NOT occurred yet. Consequently, we ought to remain neutral, until support, or, resistance is solidly taken out, thereby providing confirmation of either a break-out, or, a break-down. With regards to tomorrow, given the indices are stuck between their 21 and 50 DMAs, they can go either way. There is something that we would like to share with you, because we find it particularly interesting. Notice that the last three bottoms in the Quantifier, have occurred at higher levels, forming a rising support line. The Quantifiers measure the overall technical condition of the market, thus, by making higher lows, they are telling us that each of the past 3 lows, has occurred with improving technicals underneath it! Moreover, the McClellan Oscillator is already at the bottom of its range, only after two days of downside action. What does all that mean? Similar observations in the past 15 years, have resulted 66% of the time in a false break down, which is followed by the real break out to the upside.  Please understand that this is not a forecast, we are simply sharing with you our observations over the years, in our effort to keep you fully aware of all the possibilities that may lie ahead. Pay attention to the support/resistance levels listed on the table, and if the markets break down, wait until the next day to see if there is follow thru, before initiating positions.

(11-13-03) Today's action ought to be classified as "consolidation." Given that the overall trend is still up, the odds ought to be better than even, that the consolidation will turn out to be a bullish one, resulting in another push to the upside. At the same time we need to remain cognizant of the many divergences, and the market's inability to make progress, despite decent news, supportive of the bullish case. In summary, we continue to view the overall  market picture as neutral with a slight positive bias, but one, whose risk level has risen. PAY ATTENTION TO THE SUPPORT/RESISTANCE levels shown in the table below.

(11-12-03) The bulls were able to mount an offensive at a critical point, demonstrating that they are still in control, and confirming our expectation (see comments for 11-10-03) that we'll get a bounce. The question is; how much higher can they take the indices from today's close? Take a look at the hourly chart and the McClellan Oscillator for NASDAQ. We got hourly resistance at 2005, at the same time, if we got the same a/d ratio tomorrow, as we did today, the Oscillator will reach the declining tops line. Given that NASDAQ has been the leading index, we want to concentrate on its action tomorrow, especially after the release of "good news" by AMAT, the management of which, declared  after the close that "tech has turned the corner." Thus, for tomorrow's trading we need to pay attention to the 1995-2005 zone, watch out for a gap at the opening and a reversal. If that doesn't happen, expect the bulls to maintain control of the market going into next week.

(11-11-03) The markets consolidated in a somewhat bearish fashion. Two of the major indices (Dow, NASDAQ) closed marginally below support, while breadth and up/down volume were negative by a margin of 2:1. The weak price action, weak breadth and on-going divergences suggest more weakness in the short term. However, the bulls have one more chance to show that they are still in control; the McClellan Oscillator is at  support, logically the bulls ought to be able to mount an offensive move here. If they don't, then it would become almost certain that the first downside targets will be visited within the next 1-3 trading days. 

(11-10-03)  Today's decline wasn't much of a surprise, given Friday's reversal. Moreover, we got the McClellan Oscillators, the Thrust Oscillators, and the Buy/Sell Indexes, all turn down, implying more weakness in the short term. Having said all that, we also need to note that a) the indices closed right at their 20 DMAs, and b) the McClellan Oscillators went penetrated the zero line, there is a strong tendency for the indices to bounce off their 20 DMAs, and for the Oscillators to re-test the zero line, which means we can't rule out a bounce tomorrow. Moreover, as long as the indices do not close below the first downside targets (see table below) the trend is still up. Our belief is, ALL ELSE BEING EQUAL (in other words, in the absence of an exogenous event that changes the current market dynamics)   if the indices continue to decline for another 2-3 trading days, we'll see another tradable rally, due to the fact that inflows still exceed outflows (mutual funds took in 5b during the first week of November) lasting between 6-9 trading days.

(11-6-03) The indices continued to consolidate, rallying into the close towards the upper boundary of the consolidation zone, as traders decided to position themselves bullishly, betting on  a break out to the upside tomorrow, resulting from a positive employment report.  The report will probably be a catalyst that will move the market, however our position remains the same:  As far as  traders are concerned, the key thing to do, is pay attention to the upper/lower boundaries of the consolidation zone for each index. 

(11-5-03) The indices are consolidating in a tight range, given that the larger trend is up, one ought to expect the resolution of the consolidation to be on the upside. At the same time, the  negative divergences, and the TOs along with the BSEs  turning down, suggest that caution is warranted, and any upside resolution may be limited in magnitude. As far traders are concerned, the key thing to do is pay attention to the upper/lower boundaries of the consolidation zone for each index.

(11-4-03) Today's decline is meaningless unless there is follow thru tomorrow that results in a close below support (see numbers in blue in the  table below) We do want to be cognizant of the fact that both the Thrust Oscillator, and the Buy/Sell Index, appear to be losing steam, but until they turn down, and the indices close below support, the trend is still UP. Can the rally suddenly abort? YES, Why? Because the RYDEX readings are in SELL territory, and b)  the current rally started without the McClellan Summation Index having gone below the 1000 level. 

(11-3-03) The indices closed above zone resistance confirming the short-term bias to be on the upside. All else being equal, from here we got to expect a test of  resistance, and in all likelihood a run to the first upside targets by Wednesday. We will re-evaluate from there. For now, the bulls are still in control, until proven otherwise, although tomorrow can easily be a down day.  Having said all that, we do want to keep in mind that a) the RYDEX readings are in SELL territory, and b) given that the current rally started without the McClellan Summation Index having gone below the 1000 level, the odds for an abrupt termination are better than even.