Analysis - Thursday, February 22, 2001 8 p.m.
Last evening we told you we thought the Dow would likely
fall down near or below its 21 Day 3 1/2% Exponential Trading
Band today, which it normally does near important lows. We
also stated that we thought there was a chance that we could
see a low as early as today. The bottom of the 21-Day 3 1/2%
Exponential Trading Band today was 10386. At the lows today
the Dow was down another 154 points, reaching a print low of
10372.43.
The Gann Monthly Chart on the Dow turned down today. This
is an important Gann Chart and while a downturn in this chart
is not an actual sell signal, it often signals that even lower
prices are coming over the next several weeks. However we
have examined every Monthly Chart swing on the Dow for the
last 104 years, so we are quite familiar with its habits. Just
as often a downturn in this chart will occur either the same
day, or within just a few days of important bottoms. For
instance, the last downturn occurred on 12/20/00. That was the
exact day of the 10319 closing low in the Dow. The Dow then
rose 627 points on a closing basis in just eight trading days.
The Monthly Chart turned down on 6/30/00. This was one day
after the 10398 closing low and the exact day of the 10162
intraday low. That was the bottom and the Dow then rose 1,357
points intraday to the 11519 intraday high of 9/6/00. The
Monthly Chart turned down on 8/2/99. This was the exact day
of the 10646 closing low and was followed by a rally of 680
points to the 11326 closing high of 8/25/99. Prior to that
turn the Monthly Chart turned down on 6/1/99. That was the
exact day of the 10334 intraday low and was followed by a
rise of 988 points to an intraday high of 11322 on 7/19/99.
You must examine the status of the other indicators whenever
this chart turns down to determine if it is indeed turning
down near an important bottom. A good case can be made for
that being the case here.
As we stated last evening, the 5-Day RSI has reached its
most oversold reading since the very important October lows
of last year. In fact most of our key momentum indicators
have reached similar extremes.
As we also stated last evening,the next Cycle low is due
today, Feb. 22, plus or minus 1 day.
There are signs the Nasdaq is also near a bottom of
importance. For instance,on February 9 the Nasdaq closed at
2470, with its 5-Day RSI closing at 13.74. Today the Nasdaq
closed over 225 points lower, but the RSI today is 18.24, a
potentially bullish divergence common near important lows.
The Nasdaq has also fallen down to the bottom of its 10 Day
10% Exponential Trading Band, which is normally a very strong
zone of support. We believe the Nasdaq is completing a 3 wave
Zig Zag correction off the March highs of last year. Wave A
fell 2090 points. Wave B came within 2.13% of a perfect
Fibonacci 61.8% retracement of Wave A. So far Wave C has
fallen to within just 14 points, or 0.66%, of perfectly
matching Wave A.
The Gann 3-Day Chart could turn up tomorrow, and that
could mean we have seen at least a short term low, if not an
even more important low. For the 3-Day Chart to turn up the
Dow must hold above 10468.14 intraday during any decline
tomorrow, and must also rise above 10828.54 intraday by the
close of trading.
The Hourly Charts would give a short-term buy signal on
any rally above 10567 on a print basis in the Dow tomorrow
morning. If that occurs the Dow would have to hold above
10406 on a print basis for the signal to remain valid. The
Hourly Charts on the Nasdaq would give a short-term buy
signal on any rally above 2292 tomorrow morning. If that
occurs the Nasdaq would have to hold above 2185 for that
signal to remain valid. However the action in the 3-Day Chart
tomorrow is more important than any short term signal from
the Hourly Charts.
Hold current positions and we will have new instructions
for you at 12:30 tomorrow. |
