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UPDATE FOR WEEK ENDING
12-28-01
Charts: As
we stated earlier, most indicators are pointing to the formation
of a top, on the other hand, the trend is still up, and
seasonal factors are strongly in the favor of higher prices.
Therefore, it is futile to try to forecast which of the
two will win out over the next 1-2 weeks. However, we are
certain there are three possible scenarios for NASDAQ (see
below) We are concentrating on NASDAQ because we believe it
holds the key to the future direction of the U.S. equity
markets.
Our
assumption is that NASDAQ has been moving in an upwards sloping
channel, with the recent lows representing the bottom of the
channel. Consequently, we have three possible scenarios:
1)
NASDAQ moves back up towards the upper range of the channel.
(probability : 28.65%
2)
NASDAQ attempts to move up towards the upper end of the
channel, but it fails. (probability: 34.12%)
3)
NASDAQ falls out of the channel -within the next 1-3 trading
days- and then it makes an attempt to move back into the
channel but it fails. (probability 28.11%)
The
probabilities are too close to draw a definite forecast,
however, the message investors should get out of this, is that
they should have contingency plans, for all three outcomes.
SPDRs/Sectors:
Pay attention to the XAU. If it finds support at the 53-54
level, it could easily rally 10%-12%, the same but opposite
holds true if it breaks support!.
UPDATE FOR WEEK ENDING
12-21-01
Charts: Both
the price charts and the indicator charts indicate that
"tops" should be in place, putting pressure on prices.
However, the strong seasonal tendency for price
gains, suggests higher prices. Therefore, we really
do not feel comfortable making a firm prognostication for next
week. Given the conflicting picture, we believe the market
can go either way. However, if it does finish the week on a sour note, it
would be a confirmation that the intermediate trend has changed
from positive to negative.
SPDRs/Sectors:
The semiconductor sector was the worst performing sector of
the week. It should be noted that this has been the best performing
sector since 9-21-01. The reason for the robust rally was
supposedly the coming economic recovery, and the assumption that
semiconductor business had hit bottom. However, as more and more
semiconductor companies continue to warn, the whole sector may
come unglued in the coming days, or weeks. If you have profits
in this sector, protect them.
UPDATE FOR WEEK ENDING
12-14-01
Charts: Our
conclusion from reviewing the price charts, and the indicator
charts is pretty simple and straightforward: Last week's decline
was not enough to trigger a multi-week rally, but it is enough
to trigger a "trading rally" for a few days. The odds
are evenly split between a further decline next week,
setting the stage for a more robust rally, and a a trading rally
of limited scope. We would like to echo the view of Mr.
McClellan, that at the moment neither the bulls, nor, the bears
seem to be in control. Both have relinquished control to traders
on the floor who have no particular convictions and they can
push the markets in either direction, for the simple purpose of
generating trading gains. Thus, we would suggest to investors
the need to be flexible in this coming week. If you have gains,
be quick to protect them, because today's gains can turn into
tomorrow's losses in this type of market environment.
SPDRs/Sectors: The networking sector was the biggest loser, after
having gained the most since 9-21-01. The reason for the robust
gains was supposedly that the sector had seen the bottom. We
have repeatedly pointed out that the markets can rally and fall,
beyond what the fundamentals can support, and in the end, there
is always a reconciliation. From a risk point of view, one wants
both the technicals and the fundamentals to confirm each other,
if there is a disassociation between the two, sooner or later,
there will be reckoning. The recent rally in NASDAQ has been
spectacular, at the same time so has been the divorce between
stock prices and fundamentals. Last week's reports from CIEN,
LU, AMAT, ORCL, prove the point beyond any doubt. Why would AMAT
be cutting 1600 jobs if the company believed its business had
reached a bottom? Why would CIEN be reporting that the company
expects further revenue decline in 2002, if its business had
indeed bottomed? We pointed out last week, that the same day the
ever optimistic -and laughable C.E.O of Cisco- declared that he
sees a "possible" upturn, Sprint -one of Ciscos's
biggest customers- announced additional cuts in capital spending
for 2002. The bottom line is this: the market can
rally further, and ignore fundamentals for some time, but not
forever. Therefore, due to the current disassociation between
technicals and fundamentals there is risk in the market that
should be taken into consideration by risk-averse investors.
Moreover, if you have gains to protect, do not be complacent,
protect them!
Just
for reference we would like to share with you an e-mail that we
received yesterday:
---------
Forwarded Message ---------
DATE: Fri, 14 Dec 2001 07:35:16
From: juan sanchez >
To: "Aegean. Customer. Serv@Lycos.
Com" <aegean.customer.serv@lycos.com>
Hey Ike great show I've been following you
since the old channel 22 when
u took over for Barbera.....you're doing a great service for the
benefit of
the little guy, I' ve never told u this but, u got me out of
csco back in
your TV days when you flat out came out and said Cisco
management should be
thrown in jail ( or something like that) for cooking the
books,you ripped
them up pretty good right after they announced record earnings,,
the Enron
situation reminded me of that. any way THANKS
your friend
NDM in Simi Valley
thanks
Mr. Iossif had warned of Cisco's vulnerabilities in early
October of 2000...
UPDATE FOR WEEK ENDING
1 2-7-01
Charts:
The quantifier, as well as, the indicator charts lead us
to believe that the pick up in volatility we saw last week, was
only the beginning, of at least another 10-15 trading days
of increased volatility and possibly whipsawed price
action. Unless there is an external event that helps the
market to propel higher, our expectation for this week is to be
a negative one.
SPDRs/Sectors: The networking sector was the star of the week. However,
consider the following: The market is telling us that networking
gear manufacturers will see a pick up in orders next year,
while yesterday Sprint, announced that they cut their capital
expenditures for 2002 by 35% opposed to the 20%, that they had
originally announced. If the companies that actually buy the
stuff, are planning to cut even more their purchases, where is
the improvement in orders going to come from next year? If you
know, please tell us, so we share the information with everyone
else. For more on the subject you may want to read this article:
http://www.thestreet.com/tech/scottmoritz/10004884.html
(if
you wish to trade a basket of networking stocks check out IAH)
UPDATE FOR WEEK ENDING
1 1-30-01
Charts:
Four points can be made from the price charts, and the indicator
charts:
1)
The Indexes have rallied up to critical resistance levels.
2)
The negative divergences have widened over the past week
3)
Sentiment has gotten to the same bullish levels that have marked
every major market top the past two years.
4)
The quantifiers indicate that a pick-up in volatility is imminent.
Therefore,
the only logical conclusion that can be drawn is this: the
risk on the downside has increased over the past week.
Although it does not mean that the market's demise is imminent,
it does mean that those who are long, or, wish to go long must
not be complacent. Be alert!
SPDRs/Sectors:
Watch out for gold, if the general market declines. If
NASDAQ advances watch out for biotech, which has been absent from both
the worst and best performing sectors in the past week, it
has been "quite" which is rather unusual, and
indicative of an impending move...
UPDATE FOR WEEK ENDING
10-12-01
Charts:
Thru-out last week, we counted 68 times "experts" on
CNBC touting that the market was at pre-attack levels and that
somehow it meant something positive. Let's examine what it
really means. First of all we want you to to do this: ask
yourself if you believe that the "event risk" has been
eliminated somehow . More likely most of you will answer no. The
President and the FBI, are telling us, there is still risk, and
quite a bit of it. The market -by rallying back to pre-attack
levels- it is telling us that no risk premium is required,
presumably, because no "event risk" is in the horizon!
Who's right? We will not pass judgment on either the President
or the FBI. We will not even pass judgment on the market either.
However, we will point out the following: in the past 18 months,
the markets rallied 8 times, on "hope" alone that
things will get better, only to be crushed by the real evidence
when it arrived later. So, the "omnipotent" market
that knows everything has been wrong 8 out of the past 8 times
in the last 18 months. Is it right now? The charts do not seem
to be supporting that. The current rally has the
"signature" of all the past 8 bear market rallies, it
is not based on any real evidence, and it is concentrated on a
handful of momentum stocks. Can it go higher? Probably it can,
according to our forecast on 9-19-01 (see market timing) NASDAQ
can reach 1825, and the SP500 1150. Will it continue straight
up? Given the divergences we are already seeing, a pull back
should be expected shortly before or after options expiration
this coming Friday.
SPDRs/Sectors:
The action was dominated -as we pointed out in
part 3b- by a handful of "momentum" stocks in the
Semiconductor and Networking sector. Given the high volatility
of these stocks, they have been the trading vehicle of choice
for momentum traders.
UPDATE FOR WEEK ENDING
10-5-01
Charts:
In our daily commentary for Thursday we said:
"The reason why we use "indicators" to gauge the
"true" state of the market, is because price looked at
in a vacuum, can be very misleading. Almost 80% of the
indicators we follow -which you just reviewed- are saying two
things:
1.
The internal condition of the market is currently classified as
"neutral." The markets, simply rallied back up to
their resistance levels, from which they have been turned down
numerous times.
2.
The markets went from fully oversold, to fully overbought,
without the benefit of having built a "base." Why is a
base so important? Think about rallies as "tall"
buildings. The stronger the foundation (base) the taller
(higher) the building (rally) Without a foundation, any building
can collapse under its own weight, and without even any external
pressure. That is why we view the current rally with
suspicion: no foundation, and internals just neutral. If the
market is to turn down, it should turn down from somewhere
around here."
By
Friday's close we had gotten a repetition of Thursday's
uninspiring performance. Basically, this week NASDAQ caught up
with the DJIA and the SP500. Following that, investors started
to think over the recent gains trying to decide if more are
warranted, or, if some profit taking is in order! They spent two
days thinking about it without a clear verdict. We suspect that
will change as early as next week. At this point investors have
to weight the potential positive impact from favorable monetary
and fiscal policy against the unknown pitfalls arising from our
war on terrorism. Conventional wisdom supports the idea, that
unless we have another mass attack on U.S. soil, the economy
should indeed recover in 2002. The problem with this, is simply
the fact that for the past 18 months conventional wisdom has not
worked! We strongly believe, that unless we have some real
positive break-thru in the military front, stocks will pull back
in the coming days.
SPDRs/Sectors:
The composition of the rally, only confirms its
shaky ground. If indeed things are turning better for the
economy and the stock market, why in the world
"investors" are shunning basic materials, and
cyclicals, and at the same time espousing technology stocks
-which are also cyclical? We think the answer lies
in the fact that, current market participants are simply trading
the market, without the necessary conviction, or confidence in
the market, that allows investors to invest for the long term.
Further more, the sharp decline in financial stocks despite the
most favorable interest rate environment in 39 years, should be
a red flag, to those strongly espousing the idea of a
"V" type shape of recovery in the coming months
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AEGEANCAPITAL
GROUP INC.
