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D.B. Hi
Ike, how are you?
I.I.
Good, thank you.
D.B.
Several times in March and also in April, you
stated that you expected the rally to last until
the end of June, and in our last interview on
5-26-03, you concluded by saying:
"...When
the markets transition from a flat trend that has been
in effect for several months, to a new trend, we get
negative divergences. The reason is this: if the
down-trend is to re-assert itself we would be expecting
negative divergences to develop at the top of the range,
signaling that the markets are running out of steam, and
thus they will succumb to resistance. On the other hand,
when a market has a strong advance, and is about
to break thru resistance, usually it consolidates right
below it, and it undergoes an internal correction,
without giving up much of the price gains, which may be
the current case."
The
markets broke thru resistance, but now we are
near the end of June, so, is the rally about to
end?
I.I.
Remarkably, at this very moment we got the same
combination as we had four weeks ago, but even
more pronounced! The divergences are steeper,
and the price action is stronger! This
development is best illustrated by the McClellan
Oscillators.
So,
the bears can point to the
negative readings in the Oscillator and
point out that it is making new 4 month lows, while the indices
are just a few points below their new recovery highs, and conclude that the market internals
do not support higher prices. On the other hand, the bulls can
point out to the same reading, and conclude that the market is
mildly oversold, and thus we should have another rally from
here. If the bears are right, then the bullish price action, is
actually a "bull trap." Similarly, if the
bulls are right, the market can go parabolic from here.
D.B.
What do you think?
I.I.
I believe that either scenario is equally
possible, and I base my opinion on the fact that
two of our market timing indicators are on a
"SELL" signal, and two are on a
"BUY" signal, and that is what I wish
to emphasize thru out this interview, and get it
across very clearly, which means investors at
this point ought to be quite flexible.
D.B.
I would like to ask you a question, you ask your
guests, what do you like most about the market's
action, and what do you dislike the most?
I.I.
I like the fact that price has held strong
as a rock. What I dislike the most, is that we
are seeing signs of distribution and diminishing
liquidity, and even if we get a push higher, if
it is not accompanied by an injection of
liquidity, it will be narrow based and it will
falter quickly.
D.B.
What do you base this opinion upon?
I.I.
I base it on our Price/Volume indicators and on
the price action itself by market sectors. The past
10 days we have seen inability of all sectors to rally,
and break downs in leading sectors such as Biotech,
Semiconductors, and Home Builders. Such action is
indicative of diminishing liquidity. Investors must sell
one sector in order to invest in another.
D.B.
What would you say to investors/traders at this
point?
I.I.
Be flexible, otherwise you can get your head
handed to you!
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