(9-30-04) Today's  price action was indicative of consolidation, although,  marginally it  favored the bulls, given the positive breadth and volume. Our indicators remain  neutral,  and we  still  see very little to make a major directional  commitment to the market, given that the current risks are equally weighted both to the upside and to the downside. There are times that the best action is inaction, and we believe this is one of those times. 

In our view,  the most important development of the last few days, is the action in the credit markets versus the dollar. Notice that  rising yields, did not aid the  dollar. If this development becomes a trend -that is a  key condition-  then we will be looking at a major shift in the dynamics of the economy, with rather bearish implications for the intermediate term.

(9-29-04) The indices rallied for the second day accompanied by decent breadth and volume, judging by recent standards. All of  our market timing indicators turned "NEUTRAL"   reflecting  a technical condition  that favors downside and upside risk, equally.  Cash, or hedged positions,  remain our preferred strategy for the time being. We see no reason for investors/traders to  be  making any large commitment based  on  directional  expectations. 

(9-28-04) Today's  bounce  gives the bulls the  opportunity to follow thru and push the indices above resistance. Until they prove that they can do it, our current assumptions will remain in unchanged. There is nothing else to add today.

(9-27-04)  All the indicators, and the price pattern that we have observed thru-out the most recent rally, point to striking similarities with all three previous rallies. Keep in mind that a pattern is assumed to be in effect, until it is broken. The next few days, we will have  a very important test of our assumption, and a opportunity to re-affirm them, or, abandon them. The McClellan Oscillators are getting oversold, thus, a bounce ought to take place shortly. If that bounce is robust and takes out the most recent highs, then the pattern will have been negated, and we will re-evaluate based upon the new information, and data. If the bounce is meager, and fails to take out the first resistance levels (see table below) then our current assumptions will remain in effect.  Bottom line:  Until the indices close above their most recent highs, negating the pattern, we must conclude that the most recent rally was no different than the previous three ones, which all ended in failure, and were followed by lower lows. I

(9-23-04)  The indices moved within a rather narrow range today, as the bulls tried to stabilize the markets by stepping up to the plate and doing some buying as the indices made contact with  support. However, there is got to be a whole a lot more follow thru tomorrow,  in order to achieve a genuine turn-around. Technically speaking, the condition of the market is  exactly the  same, as the one on 7-2-04 (see arrows in the BSE charts below) If the bull is alive, and the markets are going to continue to rally, this is the point where we need to have a reversal. Otherwise, we'll end up with one more rally, failing at the exact same point, as the previous three! 

(9-22-04)  On Monday we got a bearish set up,  that was negated with yesterday's rally, which in turn gave us a bullish set up for today, that was also  negated with today's decline!  Such choppy action is usually observed near turning points, and it may very well turned out that the markets have reached such a point. The indicators are  behaving  in a manner  associated with the  termination of up-trends, and the indices  did violate the up-trend line that had provided support since the beginning of the rally in mid-August. However, given how choppy  the action has been, and in the interest of objectivity, we would like to see one more day of continuation to the downside, and a close below the support levels shown in the table below, before we pass judgment.  If tomorrow the indices close below support, risk averse investors ought to liquidate  the  10%, or, 20%  of their portfolio that is currently long, and move into cash.

(9-21-04) Yesterday's  negative action was  invalidated  today  since most indices not only remained within their up-trending channels, but also, they rallied towards the upper end of their channel, and closed near the high of the day, suggesting that we ought to see at least one  more day -and perhaps two more days- of  bullish action. Breadth was even stronger than the gains would suggest, but volume contracted.  In the 15 years that we have been students of the markets, we have observed that  this type of combination -strong breadth/weak volume- three out of every  four times has resulted in additional rally lasting another 1-3 days,   followed by a decline in excess of 3%-3.5%.  Also notice that the pattern of the Quantifier for the SP indicates  "consolidation."  Consolidation patterns usually get resolved in the direction of the prevailing trend. Since the current trend is up, the odds favor that the consolidation will be resolved  thru further upside action. You probably recall that in the weekly reports for 9-10-04, and 9-17-04, we expressed the  view that  there was enough fuel left in the system to carry the SP to 1150, and NASDAQ to 1960. A successful resolution ought to carry these two indices up to those   levels.  In summary,  the bulk of the evidence suggests that the indices ought to be able to challenge resistance -see table below- and if they can close above it, then they should reach the first upside targets within a couple of days. Assuming that  volume continues to contract then we ought to expect  a swift pullback starting either upon making contact with the first upside targets, or, at any point between resistance and the first upside targets. On another note,  a potentially important development took place today, with the dollar index breaking down from its triangle  formation (see chart below) Usually that is a continuation pattern and it suggests that unless the dollar index finds support either at 87.5, or, at 87, it will go down to re-test  support at the critical 85 level.  A further decline to the 85 level,  should be rather bullish for gold and gold stocks, and in fact today,  both the XAU, and the HUI broke above resistance suggesting further rally to the 103-105 level  for the XAU, and to the  233-235 level for the HUI ( see chart on next page) If that turns out to be the case,  trading gold stocks ought to  provide  us  with even better returns than trading the popular averages (see the message that we sent to your message box, in the user section of the navigational bar, in the upper right corner)

(9-20-04) In the weekly report we said: "...The strength of any rally, is measured by the weakness of its pullbacks, we want to see how deep the first pullback is going to be -there hasn't been any to speak of, as of yet- before we determine that an increase in our long exposure is warranted." Did today's action represent the beginning of a pullback? It's too early to tell, after all,  the major indices -with the exception of the Dow- are above support. However, in our view, there are two developments which point to  continuation of today's action: a) The McClellan Oscillator appears to have failed in its attempt to rally, and it is about to re-test the zero line, b) The Dow lead the way up, so, it could very well be that it will lead the way down, during any pullback. Keep in mind though that in order for the market to pull back further we need to have more selling, which has yet to materialize. 

(9-16-04) Today's action was a victory for the bulls, the indices held up, while the McClellan Oscillators moved higher. The natural expectation is that with the proper catalyst, the indices ought to be able to  move higher. 

(9-15-04) The indices did what we thought they would today, and the question is whether tomorrow we'll see a bounce from channel support, while the McClellan Oscillators makes contact with the zero line. To put it another way, if we take a look at the Thrust Oscillator for NASDAQ, the question to ask is this; are we at point A, or, at point B? Because all the indicators remain above zero, the odds favor the notion that we are at point A. However, in the end, what really matters is price itself. If over the next two days,  price penetrates support, then the entire picture will change significantly. Stay tuned, and open minded. Our good friend, and great cycle analyst, Mr.  Stan Harley quite often  reminds people that "those who are not willing to change their minds, pretty soon, they'll have no change to mind!"

9-14-04) The indices inched higher amid accompanied by negative breadth and flat cumulative volume. Today's action provided -in our view- some confirmation that our expectations -as expressed yesterday- will ultimately be proven correct. Notice that the McClellan Oscillator turned down today,  as we had suggested. When price advances, while breadth and the oscillator turn down, usually price  changes direction  within a day. So, if  the "drama"  continues to play out as it has in similar cases in the past, tomorrow we ought to see the oscillator  declining further towards the zero line, and price turning down and moving towards channel support.

(9-9-04) The up-trending  channels remain intact while most indicators suggest that a "complex top" is being formed. We do expect a pullback from current levels, but if the indices were to trade above today's highs, then our expectation will be proven wrong, and in all likelihood we'll see a further advance to the top of the channel. Our expectation will be proven correct, if the indices were to close below today's lows, in which case channel support will be clearly violated and selling ought to accelerate.

(9-8-04) We do not have much to add with regards to today's action. The market appears to be tired and spinning its wheels looking for something -anything- to keep it afloat. We continue to look for a pullback from current levels.

(9-1-04) Today the indices  closed above yesterday's  high,  which ought to be bullish. However, the Thrust Oscillators   have yet to turn up. So, we got two consecutive days of opposite action between price and the T.O. It has been our observation over the years, that on the third they move in the same direction. Thus,  tomorrow either the indices will move above today's highs, with the T.O. following, which would imply a further rally to channel resistance. On the other hand, if they take out today's lows, the T.Os will accelerate to the downside, implying test of channel support.

(8-30-04) We got a decent looking reversal today, but no price support was tested, and no  zero lines were tested by any of the indicators. Thus, we are a bit suspicious due to the fact that over the years,  we have observed  these types of reversal not to be very reliable. For tomorrow,  if the bullish case is to strengthen, then we ought to see the indices close above yesterday's highs. However, if we get   whimpy action reflecting just a few points gain, then Thursday, may  turn out to be a rather ugly day. 

(8-30-04) Today's action, provided market  observants with three  data points, of significance.  A) The Quantifiers have been oscillating around the zero line in a narrow 4 point range, for six trading days,  this type of action always implies that the markets are building energy for their next move, which -on average- exceeds 3%-3.5%. B) The SP and the DOW are in short term up-trending channels,  and only one day away from testing channel support. If channel support holds, and they rally back up to channel resistance, the distance traveled will be approximately 3%, which  is in agreement with what the Quantifiers are telling us. Both the Dow and the SP are in rising channels, thus the odds  favor that the 3% move will be from channel support, to channel resistance. C) NASDAQ is still within a larger declining channel and it  turned after approaching  channel resistance. If resistance continues to hold, NASDAQ will go back down to test channel support, which is roughly 3.5% below today's closing levels, and in agreement with what the Quantifier  is telling.

When we put it all together,  the 3 data points are telling that we ought to expect a 3%-3.5% move in the popular indices within the next 3-6 trading days. If the Dow and the SP lead the move,  the odds favor a rally and they will pull  NASDAQ along for the ride, if NASDAQ leads the move, the odds favor a decline, and it will  pull  along for the ride, the  SP, and  the Dow. So, watch the 1810 support level for NASDAQ, and  channel support for the Dow and the SP. If channel supports  hold and we have a reversal to the upside by the Dow, and  the SP,  NASDAQ should be able to hold above 1810 and reverse to the upside, as well, in which case the 3% move will be on the upside. If  NASDAQ violates 1810, decisively,  it will  cause the SP and the Dow to violate channel support, in which case the 3% move will be on the downside.

(8-26-04) All three major indices pulled back from channel resistance, leaving the situation -and its implications- intact, as we discussed them yesterday. Something else though that we would like to bring to your attention, is the SPX/VIX ratio. Notice that it will take just a 20 point advance in the SP, and a 1.5 point drop in the VIX,   for the ratio to reach the level that has been associated with a market top six out of six times the last 8 months. The 80 level has marked a top 100% of the time, and it will take only 20 points (1.8%) for the SP to reach the level that will cause SPX/VIX ratio to reach 80. So, ask yourselves

 "Statistically speaking, all else being equal, if the SP broke thru resistance and rallied another 20 points, is it more likely that  such a move would mark a top, or, is it more likely that such a move would   indicate the beginning  of a new leg up?"

(8-25-04) The indices are consolidating in a bullish fashion, which implies continuation. However, the indicators have rolled over implying termination! From March of 2003 up until June 2004, every time the market had to deal with a contest between bullish price action, and bearish indicator readings, price won each and every time. All that changed in June, price lost and lost big. So, the important thing for investors/traders to watch for in the coming days is this: if price wins out again, and the indices rally above the first upside targets it would imply that the bulls have  taken control of the market away from the bears, if price loses out again, it would imply that the bearish mode -in effect since June- is  still in effect, and sellers are in control of the market. 

(8-24-04) We do not have  much to add today. We had an outside day -which is negative- with positive breadth -which is positive. In the end, today was in our view a "no event" day. Nothing really changed, and yesterday's comments still stands. 

(8-23-04) There are several points that need to be made after today's action. First, the 5 day trading Oscillator -both for NASDAQ, and the SP500- are at the top of their range, suggesting that if a pullback didn't start today, in all likelihood it will by Wednesday. Second, the pattern in NASDAQ's a/d suggests that me say further upside action (see circled areas) Third, the SPX/VIX ratio is not all that far form the level that the SP was turned down 5  out of the last 5 times! Fourth, the Quantifiers are at the zero line, which is the demarcation point between dead cat bounces within a downtrend, and sustainable rallies. It has yet to be seen which one of the two is at hand. So, when we sum it all up this is the conclusion we come up with: We ought to expect a pullback between current levels and resistance (see table below) If they manage to overcome resistance and head towards the first upside targets, the Volatility ratios will climb to the level that has stopped every rally in the 20 years that we have data for, with the exception of only one time;  August of 2000, which wasn't exactly an ideal time to be buying stocks.

(8-19-04) Today's action was text-book case, all indices pulled back to the break-out point, and all held above it,   unless there is a close below it, by definition, the break out is still valid. One interesting development today, was the action by the BSEs. They continued to rise, despite the pullback and the fact that down volume exceeded up volume. The implication is that although there were fewer buyers than sellers today, today's buying was not due to short covering.  If  short-covering induced buying is over, now, real buyers must step up to the plate, and they have to come in greater numbers than today's. If the markets have already run out of ready, willing and able buyers, who are buying because of their conviction that the markets are going higher, then we'll see lower lows by next week. However, for the time being this is only a low-odds  possibility, something to keep in mind.

(8-18-04) The indices took out yesterday's highs early in the day, institutional  traders know that such action implies that the odds favored continuation of the early advance for the rest of the day by a margin of 2-to-1, so, they jumped aboard for a quick buck, at the same time,  short-sellers knowing that the odds were against them for the rest of day by a margin of 2-to-1, scrambled to cover their shorts to prevent losses, thus, between the two groups we had enough fuel to get the indices above channel resistance, once, that happened, traders whose discipline dictates that they go long only after a down-trend is broken, they came aboard, pushing the indices even higher. Closing above channel resistance, breaking the downtrend is almost certain to bring in more buyers in the next few days, pushing prices towards at least the first upside targets. Thus, at this point we can conclude that, as long as the indices don't fall back into the channel, then Scenario#2, is underway with the odds in favor of higher prices. How much higher? At least up to resistance, and maybe up to the first upside targets.

(8-17-04) The indices rallied up to resistance  and backed off, which is quite usual the first time an index, or, a stock makes an attempt to overcome resistance. The two scenarios we showed yesterday, are still the two most probable outcomes. Today's action  did not provide any additional information  about  the market's ultimate intentions.  For tomorrow,  we ought to pay attention early to today's highs and lows. Our experience with  similar set-ups in the last 15 years, highly suggests that if either is taken out is within the first 30-45 minutes of trading, the odds will favor continuation of that early move by a margin of 2 to 1. 

(8-16-04)The markets rallied from minor support on low volume, and plenty of hope. Given today's action, the two most probable scenarios -but not the only ones-  that we can expect to see taking place going forward,  are the two illustrated by the  charts below. Either, the SP will fail to overcome resistance at 1080, and it will turn back down, eventually  falling to the next support level at 1030, OR, it will overcome  resistance at 1080, and move on to challenge channel resistance at 1088-1090. If it can get over 1088-1090,  it will run up to its 200 DMA at 1109. 

(8-12-04) Price action continues to be poor, while volume keeps pointing to the downside. At this point the markets are oversold enough to stage a 1-2 bounce, but not oversold enough to stage a sustainable recovery. Consequently, our view remains the same that overall the greater risk continues to be  on the downside. 

(8-11-04) The markets gapped to the downside right at the start, but they staged a comeback rally late in the afternoon, with the Dow and the SP erasing most of their earlier losses. The declining BSEs indicate that the late action represented , short covering, and not genuine buying, however, keep in mind that many rallies are ignited due to short covering. Notice that NASDAQ cumulative volume made a lower low, but price didn't. Volume precedes price, and it suggests lower prices. However, notice that the Thrust Oscillators are  making an attempt to turn around -they haven't, yet- and if tomorrow we get continuation to the upside, then we ought to expect a further advance up to channel resistance by Friday (see charts on page 1) with lower prices to follow later.

(8-10-04) The markets staged a relief rally from yesterday's closing levels, and it could carry up to resistance (see table below) However, nothing so far suggests that the trend is about to change from down to up. Until resistance is overcome, and the indicators turn positive, the trend is down and the greater risk is on the downside. As of 6:50 PM PACIFIC, NDX futures in GLOBEX trading were already down 7 points, after CISCO's "cautious guidance."

(8-9-04)Today we had an "inside day" with negative breadth, and cumulative volume. Notice that channel support is a bit lower from today's closing levels, consequently, we can't rule out  a dip lower. We haven't seen anything suggesting that the markets are ready to right themselves.  We didn't see anything today that made us change our view  that the markets will probably stage a rebound starting between current levels and the first downside targets. However, such rally ought to be used to lighten up on long positions, and/or, to  sell short. 

(8-5-04) Higher oil prices and un-inspiring earnings reports, drove the popular indices below yesterday's lows, and from there, it was all down hill. We don't have much to add other than unless tomorrow's employment report manages to win  investors'  "hearts and minds"  the indices will penetrate support, and head to the first downside targets. The interesting part is that the indices are making new lows for the year, but the oscillators are far from oversold. Is that a sign of a massive positive divergence, or, a sign that the decline  is only about half way thru? We'll  elaborate our thoughts on this question in the up-coming weekly report. However, so far, the markets' action is consistent with what we described  on 6-1-04 in the article titled ""The importance of context in interpreting the readings of technical indicators"  (visit: http://www.financialsense.com/Market/iossif/2004/0601.html )

(8-4-04) Today's  price  behavior, implies a "stabilization act" was under way, and we have to wait until tomorrow, to find out if it succeeded.  If it did, tomorrow  the indices will climb above today's highs, and more than likely they will go on to test resistance. If the stabilization act failed, tomorrow  the indices will decline below today's low, and more than likely, they will go on to test support. If today's attempt to  turn things around turns out to be an exercise in futility, then we can expect over the next 2-3 trading days, a  price action similar to the one that followed a similar "stabilization act" in  early May (see circled area on the SP chart)

Bottom line for tomorrow: Pay attention to today's high/low. Above today's high, all is well, below today's low, all is rotten! 

(8-3-04) Today's action does create legitimate doubts about the markets' ability to continue higher. As we pointed out yesterday, the indices are within the critical zone where either the rally fails, or, it accelerates. One thing that we do what to make clear, is that although today's action may indeed turn out to mark the end of  a dead-cat bounce, we can't conclude such based on the action from one single day. It is not uncommon for the markets to experience a violent reversal when the technical indicators  make their first  contact with the zero line, only to reverse once again the following day! Therefore, as ugly as the price action was today, don't jump into any conclusions tonight. To make an objective assessment we need one more, and perhaps two more days worth of price action. For tomorrow,  pay attention to the support levels listed on the table below. If support holds, and the internals are positive the markets will rally back to today's highs. If support is violated, and the internals are negative, the odds will be better than even that they will make contact with the first downside targets.

(8-2-04)The indices overcame channel resistance while most technical indicators are very near their respective zero lines. If the price action of the past five days represents the beginning of a 3-5 week rally, then we ought to see acceleration to the upside over the next couple of days, and a close above the first upside targets.  However, if the price action of the past five days, represents nothing more but a dead cat bounce, then we'll see the indices stalling within their respective resistance zones, and by week's end, they will roll over to the downside.  First sign of weakness, and trouble would be a close below today's intra-day lows.