10-31-01

Charts:  Yesterday we said: 

"We are seeing the results of two weeks of price advances unconfirmed by any technical indicators. Normally the first break, is not lethal, and there is another attempt to resume the advance after that. So, we suspect that the current pull-back will last another 1-3 trading days, but soon after we will see a bounce. How spirited that bounce is, will determine the course of the market in an intermediate basis."

Today we had a bounce, which we predicted in the "Before The Bell" report this morning, based upon the positive divergences that had developed on an intra-day basis.  However, as soon as, those divergences ceased, the rally died off. It is not unusual for a market to move up,  pull back within the same day, and then try again the next  day. So, we really do not want to read too much into today's action, we view it neither positive, nor negative. We view it for what it really was: ambiguous.  However, we do want to stress that we believe the market will cease its ambiguity within the next 1-3 trading days, and it will begin to move in a more decisive way.

SPDRs/Sectors:   Oil related issues continue to get hammered, stay out of those issues for now.

10-30-01

Charts:  We are seeing the results of two weeks of price advances unconfirmed by any technical indicators. Normally the first break, is not lethal, and there is another attempt to resume the advance after that. So, we suspect that the current pull-back will last another 1-3 trading days, but soon after we will see a bounce. How spirited that bounce is, will determine the course of the market in an intermediate basis.

SPDRs/Sectors:   Gold continues to gain ground, while the dollar is losing ground. Keep an eye on gold stocks.

10-29-01

Charts:  Last Thursday  we said:

"The charts are indicating that the markets have pretty much run out of time and options. Either we will see an acceleration on the upside -in defiance of all the divergences that have building the past 10 trading days- or we will see a break-down.

Today we saw a rather sharp turn in price, accompanied by a sharp turn -for the worse- in the technical condition of the market. Whether the rally is indeed over, or it has more to go it has yet to be seen.  Traders/investors should focus more on the fact that even if the market makes another attempt to rally, it will not get any help from the technical. Thus the upside potential -if any- will be limited.

SPDRs/Sectors:   The sharpest declines were suffered by NASDAQ related sectors -semis, internet. We only got one thing to say: you live by NASDAQ, you die by NASDAQ!

10-25-01

Charts:  Yesterday we said:

"The charts are indicating that the markets have pretty much run out of time and options. Either we will see an acceleration on the upside -in defiance of all the divergences that have building the past 10 trading days- or we will see a break-down. Be ready to take advantage of either, but do not jump the gun at the opening, the early action may be misleading."

As it turned out  today,  the "early action" was misleading. After opening sharply lower, the markets ended up closing sharply higher! Short-sellers got squeezed pretty hard, the hardest we have seen since late April.  So, are we ready to take off for good?  Real buyers must come into the market for this to happen, if they do, the upside targets forecasted by our model, will be achieved in a matter of days. (We highly recommend today's interview with Mr. Genda, for some real astute observations on the state of the market)

SPDRs/Sectors:   Money continues to come out of ultra safe sectors, such as hospitals, and finds its way into ultra risky sectors such as internet and networking issues. Very rarely we have seen such an extreme rotation, and it is very unusual. However, one sector that has been consistently a top performer is Biotech.

10-24-01

Charts:  Yesterday we said:

"Today the bulls lost a battle, but they may not have lost the war yet! Certainly things are pilling up against the bullish scenario, however, the market in recent days has been able to pull "a rabbit out of the hat" for a day, or so!  However, at this point, the bulls will need more than just another one good day to keep things going."

Today the market pulled a rabbit out of the hat, and gave the bulls a day of victory. However, as we said yesterday for the bulls to take over, they will  need more than just one good day. The charts are indicating that the markets have pretty much run out of time and options. Either we will see an acceleration on the upside -in defiance of all the divergences that have building the past 10 trading days- or we will see a break-down. Be ready to take advantage of either, but do not jump the gun at the opening, the early action may be misleading.

SPDRs/Sectors:   Money continues to come out of ultra safe sectors, such as hospitals, and finds its way into ultra risky sectors such as internet and networking issues. Very rarely we have seen such an extreme rotation, and it is very unusual.

10-23-01

Charts:  Yesterday we said:

"The charts, and the indicators are both saying the same thing:

The bulls have repeatedly tried to move the market higher, but there has been no follow-thru by the masses (that's the reason for the negative divergences that have developed) Sooner, or, later (our belief is, it will happen sooner than later) there is going to be a resolution: either the masses will join the party the bulls are throwing, and the market will move higher, or, the bulls will give up -since nobody is showing up for their party- and the market will move lower. The odds for either outcome, are dead even (see newsletter, or, market timing model) Thus, at the moment the best strategy, is to stay alert, flexible and play both sides of the market, until there is a resolution."

Today the bulls lost a battle, but they may not have lost the war yet! Certainly things are pilling up against the bullish scenario, however, the market in recent days has been able to pull "a rabbit out of the hat" for a day, or so!  However, at this point, the bulls will need more than just another one good day to keep things going.

SPDRs/Sectors:   The most consistent trend, lately, has been strength in Biotech, and weakness in Utilities. 

10-22-01

Charts: The charts, and the indicators are both saying the same thing:

The bulls have repeteadly tried to move the market higher, but there has been no follow-thru by the masses (that's the reason for the negative divergences that have developed) Sooner, or, later (our belief is, it will happen sooner than later) there is going to be a resolution: either the masses will join the party the bulls are throwing, and the market will move higher, or, the bulls will give up -since nobody is showing up for their party- and the market will move lower. The odds for either outcome, are dead even (see newsletter, or, market timing model) Thus, at the moment the best strategy, is to stay alert, flexible and play both sides of the market, until there is a resolution.

SPDRs/Sectors:   Biotech has been the only consistent performer. 

10-16-01

Charts:  Yesterday we said: 

"All three major Indexes (DJIA, NASDAQ, SP500) continue to gain ground on the price front, - and  continue to lose ground on the technical front. As we have demonstrated thru many of our tutorials, a positive divergence results in an entry point with below average risk, while a negative divergence results in an entry point (on the long side) with  above average risk. Do not let the market play with your mind, because you think you are missing out on something, you are not, if you are a risk-averse investor! "

Today we saw the result of the negative divergences we talked about. However, we want to stress that there is no evidence yet to turn too bearish. The short-term up-trend is still intact -although it could be violated tomorrow- So, be patient!

SPDRs/Sectors:   The best performing SPDRs were the two that have been rather oversold lately, the XLE (energy) and XLF (financials). On the other hand the two worst performing sectors, were the ones that had run up the most, internet and semis. No surprise there, and no particular "message " behind the action. 

10-16-01

Charts: All three major Indexes (DJIA, NASDAQ, SP500) continue to gain ground on the price front, - and  continue to lose ground on the technical front. As we have demonstrated thru many of our tutorials, a positive divergence results in an entry point with below average risk, while a negative divergence results in an entry point (on the long side) with  above average risk. Do not let the market play with your mind, because you think you are missing out on something, you are not, if you are a risk-averse investor! 

SPDRs/Sectors:   The best performing SPDRs were the two that have been rather oversold lately, the XLE (energy) and XLF (financials) no surprise there, and no particular "message " behind the action.

10-15-01

Charts:  All three major Indexes (DJIA, NASDAQ, SP500) are in- between resistance and support, while the technical indicators have already started to roll over. That's the condition you see before "short-term" tops. We believe that all three indexes will make contact with both  support and  resistance levels,  within the next 1-5 trading days.

SPDRs/Sectors:   Notice the sharp decline in another NASDAQ sector, during a relative quiet day. If you go back the past two months (see archives for August-September) you will see the same action taking place commonly 1) a NASDAQ related sector dropping substantially during  even quite days, 2) NASDAQ related sectors have been the  day's worst performing sector 72%  of the time the last 50 trading days. (The message is probably this: NASDAQ stocks probably do not belong -yet- in your IRA account if you are planning to retire soon)

10-11-01

Charts:  Yesterday we said: 

"In September, the markets broke thru important support levels. Usually, when that happens, they rally back up to the previous support level -which now represents resistance. However, in all the years we have been students of the markets, we have never seen them coming back up to what used to be support, and break out on the upside without ever having built a "base" At the moment, we are beginning to see the first signs of negative divergences under development, due to a rally that occurred without the benefit of a foundation to build upon. We see double tops in the McClellan Oscillators, in the 10 day Summation Indexes, in the 10 day BSEs. If the rally continues, the divergences will simply become more pronounced. We have seen similar rallies the past 18 months, they all lead to nowhere."

Today, the charts you just reviewed, make even a stronger case that we are witnessing another bear market rally. There is nothing wrong picking up some profits on the long side, by participating in a rally within a bear market, profits are profits, no matter where they come from. However, there is also a good reason why -in bear markets- the rule of thumb is to short rallies, opposed to buying them: they tend to be unreliable,  they end just as abruptly as they start, and the ensuing decline is bigger than the advance, guaranteeing a loss if you hold the position. Thus, the risk in participating in a bear market rally, is much higher than the risk associated with participating in a bull market rally. Consequently, astute investors/traders require higher "insurance" and "assurance" before they commit their money to these types of rallies. In our case, the "insurance" and "assurance" come from positive divergences, from having built a "base" from reasonable P/Es, from the absence of "event risk" None of the above is present, or has been present. 

SPDRs/Sectors:   Money is coming out of defensive issues (gold, hospitals, health care) and finding its way into speculative issues such as internet and semiconductor stocks. Having closed at the levels where the markets stood before the attack on the WTC, one should wonder: given the events of the last 30 days, should people be more speculative or less speculative? (we will leave the answer up to you)

10-10-01

Charts:  In September, the markets broke thru important support levels. Usually, when that happens, they rally back up to the previous support level -which now represents resistance. However, in all the years we have been students of the markets, we have never seen them coming back up to what used to be support, and break out on the upside without ever having built a "base" At the moment, we are beginning to see the first signs of negative divergences under development, due to a rally that occurred without the benefit of a foundation to build upon. We see double tops in the McClellan Oscillators, in the 10 day Summation Indexes, in the 10 day BSEs. If the rally continues, the divergences will simply become more pronounced. We have seen similar rallies the past 18 months, they all lead to nowhere.

SPDRs/Sectors:   The best performing sectors today, were two of the most speculative: Internet and Networking stocks. We do not think serious buyers, institutional and otherwise, decided that all was fine with the stock market, and it was time to load up on Internet stocks!

10-9-01

Charts:  The Indexes are hanging around their 20 day EMAs, waiting/hoping for something to happen to give them a boost higher. That something could come from a success in the military front. However, all the signs are pointing to lower prices. Anyone who has ever traded the market knows, that nothing is certain, however, if most signs are pointing towards the same direction, in all likelihood, that is the direction the market will go. We can only say this at this point: BE PATIENT!

SPDRs/Sectors:   Even in a relatively quite day, the tech sector managed to "shine" by being one of the worst performing sectors of the day. Of course it had a lot to do with Microsoft getting rejected in its bid for an appeal in front of the Supreme Court, never-the-less, it underscores the risk lurking around in tech issues .

10-8-01

Charts:  Both the price charts, and the indicator charts are showingthe same signs of toppiness and fatigue. Unless, we get some real break-thru in the military front, we do not see how the markets can continue to hang on at current levels.

However, here's the good news: If the market did turn down, it will be a part of the "base" building process. The September lows, should be safe -unless militarily and politically things go wrong for the U.S- for at least until the first quarter of 2002.

SPDRs/Sectors:   The continuous deterioration in financial stocks, is rather telling about what the market thinks with regards to the short and intermediate condition of the economy. After 9 interest rate cuts, many banks are making 52 week lows!

10-4-01

Charts:  The major averages rallied up to their 2o day EMAs. In bear markets usually hat is the point where rallies roll over. It takes a "positive catalyst" to overcome -at least temporarily- the resistance levels imposed by the bear. After the close, ATT announced a 2 billion dollar cut in capital spending, and GLW announced that its earnings will be half of their already reduced projections, so where is the positive catalyst going to come from? We do not know, maybe bin Ladden will turn up dead!

SPDRs/Sectors:   Tech stocks were the best performing ones, with CSCO leading the pack! Yet ATT just announces another 20% cut in capital spending for telecom equipment -the ones CSCO, NT and LU make- so how much confidence can you put in this rally?

10-3-01

Charts:  The charts are suggesting that the recent rally is coming to an end. Should that happen, the SP500 and the DJIA, will experience positive divergences, which will set up the market for a multi-week rally. One thing though that investors must keep in mind is this: there is currently an "un-quantifiable" amount of "event risk" which can throw everything off! For example: if Osama bin Ladden was found mysteriously dead, the DJIA could easily rally 600 points, by the same token, if a military attack does not go all that well, the DJIA could just as  easily drop 1000 points. How do you account for this risk? you can't so investors should not bet everything on one outcome, the opposite could just as easily happen.

SPDRs/Sectors:   Just as we said yesterday:

 "Even on a relatively modest negative day, an important NASDAQ sector -semiconductors- managed to lose 3%. By now the message should be clear that NASDAQ offers lot's of risk, and not enough reward"

There is not anything else to add, is there?

10-2-01

Charts:  The markets are "pausing" before they make the next move. Based upon historical patterns, that move should be expected to be on the downside. It does not "have to" happen that way! But investors should be cognizant of the odds.

SPDRs/Sectors:  Even on a relatively modest negative day, an important NASDAQ sector -semiconductors- managed to lose 3%. By now the message should be clear that NASDAQ offers lot's of risk, and not enough reward