released its numbers showing 51% bulls. It should be noted that two weeks ago (10/11/02) the number of bull was 28.9%. The current number represents a 76% jump in bullish sentiment in just two weeks. This is one of the biggest sentiment changes -in just 10 trading days- the past 15 years. In addition, the last time bulls were over 50%, was on the week of 8/30/02. Generally speaking, such an exuberant sentiment has not been  supportive of sustainable and substantial gains ahead, in fact, it has always been associated with tops, either short, or, intermediate term. However, such bullishness can be supportive of higher prices in the very short-term. The reason is, there are too many people who believe they missed the bottom of a new bull move, and thus they are ready to jump in "no questions asked" as soon as prices begin to move higher. Therefore, if the indices appear to be breaking  above resistance, there will be plenty of bulls buying into it resulting in a "blow-off top"  similar to what we had in April of 2001. (We will try to post the charts from that period in this week's report)
  For tomorrow's trading keep in mind the numbers we gave on page one:  

DOW:  If it trades for more than 60 minutes above 8500, then it should be  expected to test the upper end of the range around 8726. If it trades for more than 60 minutes below 8336, it should test support at 8198. 

 SP500: if it trades for more than 60 minutes above 897, then it should be  expected to test resistance around 925. If it trades for more than 60 minutes below 879, it should test support at 867.

NASDAQ: if it trades for more than 60 minutes above 1347, then it should be  expected to test resistance around 1380-1390.  If it trades for more than 60 minutes below 1315, it should test support at 1280.

(10-30-02) As we had expected we saw further window dressing going into the end of the fiscal year for mutual funds, leading to higher prices which may continue again tomorrow. The price structure suggests that the indices are destined to push towards resistance (see table below) On the other hand, every single indicator we follow, both proprietary and non-proprietary, have formed significant negative divergences. Although the indices may push higher in the short-term, in all the years that we have been students of the markets, we have never seen such divergences leading to sustainable rallies. Can now be different? Anything is possible, but history suggests that it is highly improbable. Moreover, bullishness among investors, and pros alike is increasing rapidly. Today, Investors' Intelligence, announced that according to its latest poll the percentage of bears dropped from 43.2% two weeks ago to 28.3% this past week. This is the lowest level of bears since early May, and it represents a whopping decrease of 34% in just two weeks. This is one of the biggest and fastest changes in as many years as we can remember!  Such a willingness to embrace the notion that an intermediate term bottom is in place, can lead to even higher prices in the short-term, as nervous bulls who feel that they missed the rally, keep piling up. However, we have never seen in all the years that we have been students of the markets such a development  leading to a sustainable rally.  Can now be different? Anything is possible, but history suggests that it is highly improbable.

(10-29-02)Today's abysmal Consumer Confidence Report - confidence fell to a nine year low- follows the pattern we pointed out in our October  newsletter. It takes about 2 to 2 1/2 years after a bubble bursts,  for consumer confidence and spending to crack, which is what we are beginning to see. Upon release of the report, all the major indices fell to our downside targets and then  rebounded . It should be noted that they rallied , as soon as they made contact with their 50 day moving average. The 50 day moving average is one of the "bench marks" that trading programs are activated upon, which is what happened today. Given the readings that we have from the indicators - all of them are still declining- we should expect lower prices going forward. However, October 31st is the end of the fiscal year for mutual funds, and it is  conceivable that they want to show that they are "fully invested" now that the market has "bottomed" thus, their shareholders can sleep in peace that their mutual fund manager is not about to miss this new bull market which is supposedly starting just as the economy decelerates! Consequently, we may see additional buying over the next two days. For now we got to stick with our resistance and support levels.  

(10-28-02)The market's action is getting rather tricky -as if it has not been enough! In our view, the market is consolidating ahead  of its next 5%. The overbought indicators, and the negative divergences that have been building up  suggest that the direction of the move should be on the downside. However, there has been a  lot of effort  to convince investors that this is a new bull market, thus a run to the 925 level in the SP -ahead of the elections-  can't be ruled out.  For tomorrow's trading keep an eye on the  1290-1350 zone for NASDAQ. If NASDAQ breaks above 1350, it can be expected to run to the 1425-1435 zone within the next few days. Conversely, if it trades below 1290 for 3 consecutive hours, then we should expect a further decline to the 1225-1235  zone before the end of the week.

(10-24-02)  Today we got a pullback, and the significant part of it is that it broke the pattern of the last few days. Instead of having a weak early trading and a strong close, we had a modestly positive early trading and a weak close. Given that the BSEs, and the Thrust Oscillators are still declining we ought to expect lower prices for at least another 1-3 trading days. However, we need to keep in mind that the Dow is above 8300, the SP500 is above 873, and NASDAQ is above 1280. Unless they close below these support levels, the uptrend is still intact. 

(10-23-02) The markets followed the second scenario we outlined yesterday -early weakness/late rally- and thus we must expect to see the indices testing our upside targets. At the same time all the indicators are indicating that as the markets approach critical resistance, not only they are rather overbought, but also, we are seeing the negative divergences that precede market reversals. Therefore, the only logical conclusion we can draw from all this, is taht the markets will test the upside targets and then they will reverse. Moreover, we have also pointed out that the 895-925 zone in the cash SP, is the area  where many Bears went  short from, coming down from the August highs. (see report for 10-14-02) Therefore, after they have covered, there should be no more fuel left to propel the market higher which incidentally is what the declining  BSEs are implying.  Also notice that despite today's rally the Thrust Oscillators continued to decline, meaning the rally is running out of fuel as it is approaching key resistance. For tomorrow's trading look for further gains towards the upside targets accompanied by further negative divergences. 

(10-22-02) Today we had a pullback, and all the indicators turned down as well. However, there is still some room left on the upside, and the indices have not broken support yet. The Thrust Oscillators which have a reliability factor of 92% in identifying turning points, have turned down, too, implying that today's pullback should be the start of something bigger. However, until  we get confirmation from price -by breaking the daily uptrend-  we must assume that the indices can  work  their way higher to the resistance levels we show below. For tomorrow's trading we need to watch the early action rather carefully. An early rally that fizzles about mid-day and a subsequent close below 880 in the SP, and below 1280 in NASDAQ, will seal a short-term top. On the other hand, early weakness with a subsequent rally above 901 in the SP and above 1315 in NASDAQ, would mean that the indices will keep on marching towards the upside targets. 

(10-21-02) All of our indicators show the markets to be rather overbought while at the same time volume keeps decreasing, and earnings reports leave much to be desired -such as the one that Texas Instruments came out with after the close. As we noted in our weekly report we do expect a pullback to occur at this point, and it should  provide us with the opportunity to evaluate the sustainability and reliability of the rally. A low risk entry point will come after the recent gains are consolidated and support levels are held.  As we also pointed out on 10-16-02, the zone between 895 and 925 should represent formidable resistance, thus if we did not see a short-term top today, we should see it by tomorrow. Notice that the Thrust Oscillators are about to experience a negative cross over, which also implies that a short-term top should be in place. 

(10-17-02)    The markets continued to levitate upwards as a massive short squeeze is underway. Technically the markets are overbought, but the BSEs, Quantifiers and Thrust Oscillators are still pointing up, meaning there is still juice left for further gains tomorrow, and perhaps early Monday morning.  A low risk entry point will come after the recent gains are consolidated and support levels are held.  (See QQQ in  next page )If you have any doubt about this rally being a massive short squeeze, take a look at today's best performing sector. The SOX gained what it lost yesterday -regardless of deteriorating fundamentals- what happened? Short sellers piled up yesterday after Intel' s abysmal report counting on further declines today. IBM's "good earnings"  caused the market to rally, forcing short-sellers to buy back the Semis! No serious intermediate, or, long term investors would be buying the Semis when    earnings are still decelerating!   

(10-16-02)  Today we got the pullback we were expecting but the markets held at intra-day support, volume decreased,  while the BSEs and Thrust Oscillators are still pointing up. The implication of such action is that the markets may push higher before  a more meaningful pullback takes place.  Aggressive traders may want to play on the long side for a run up to the 895 level in the SP500.   We believe that for intermediate term investors a low risk entry will be in the 825-840 area as we said yesterday.  Be patient, the Quantifiers have told us this is another bear market rally, if intermediate term  investors wish to go long, they must look for a low risk entry point, which as of today,  we still do not have.  

(10-15-02) The major indexes rallied up to the upside targets we outlined yesterday, and now we should get the pullback we talked about.  We have always pointed out that the strength of any rally, is measured by the weakness of its pullbacks. If the market holds at support, then we should have a confirmation that the rally should  go further. The quantifiers are telling us that this is another bear market rally fueled by short covering as demonstrated  by the average volume that has accompanied the advance, and by the fact that despite a 12% rally in 4 days, the quantifiers merely broke above zero. Consequently, if the pullback holds at support, we would expect the rally to resume, and to top out near the level where all the shorts are chased out. Where is that level? It's near 925-935 in the SP. 

 By the time the SP rallies to the 921-925 level all shorts will be out, with the exception of new ones which do not amount to much. Therefore, if the SP pulls back to the 825-840 level, assuming support holds, we expect the SP to rally back up to the 925-940 level, before this bear market rally tops out. Thus, the 825-840 level, should represent a low risk entry point for long positions, and at that point we will have a confirmed buy signal.  

(10-9-02)   As we had expected, the markets continued right on down without even pausing! At this points we have to continue to look for our lower targets to be met in short order. With no doubt the market is getting rather oversold even by its own bear standards, thus, a bounce is in the cards. However, with so many expecting a "big one" it may not happen now. In all likelihood, we will have another failed rally from deeply oversold levels, followed by another decline, and after that, we may get the "big one!"

(10-8-02) The markets rallied after the SP500 found support at the July lows and it pulled with it the Dow and NASDAQ. However, the quality of the bounce -at least as measured by today's internal- was outright abysmal. Breadth for both the NYSE and NASDAQ was negative, declining volume exceeded advancing volume for NASDAQ issues 10 to 3. The BSEs accelerated their decline (see page 4) and the Quantifiers did not improve at all, while the SI25s are still in "free fall territory." Unless the internals improve tomorrow, any attempt to rally the markets will end before the day is over. The only positive development is that the Thrust Oscillators arrested their decline, which means we should expect somewhat higher prices early in the session tomorrow. Maybe, the markets will strengthen later in the day, but it is not very likely. We do not see any signs of an intermediate bottom as of yet.  

(10-7-02) All indices have broken below  support and they should be heading towards the downside targets we outlined last week. We are seeing several divergences, similar to the ones observed going into a tradeable low. We are inclined to believe that once these targets are met, the markets will rally strongly. However, given how weak the markets are, we caution against taking any long  positions in anticipation of a rally before the markets actually turn around. Take a look at the charts on page 1 the markets may go well below these targets. Notice that the Thrust Oscillators are accelerating on the downside."