Nightly Business report:
7/03/02: How Tech Traders Monitor The Markets
SUSIE GHARIB: As America breaks out the red, white, and blue, investors will feel a little less blue this Independence Day. The Dow finished up 47 points. And the NASDAQ added 22. But despite today's market bounce, many investors continue to struggle with what to do with their investments. We have two reports this evening: how technical traders are sizing up the markets, and a look at investment opportunities beyond American shores. We begin with Jeff Yastine.
JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: The signals have been discouraging, to say the least. Every time investors or Wall Street strategists think we're at a market bottom, stocks seem to take yet another step down the ladder. But practitioners of technical analysis, like Paul Desmond, say this is the time to pay attention for the signs that typically mark real bottoms. The key, he says, capitulation, an overused term, perhaps. But he measures it not in points lost on a stock index, but in the trading volume of the New York Stock Exchange, noting the trading volume of stocks going up, compared to the volume of stocks going down.
PAUL DESMOND, PRESIDENT, "LOWRY'S MARKET REPORTS": Typically, for example, we see, what we refer to as 90 percent downside days, in which 90 percent of all of the volume occurs on the downside, and 90 percent of all the price changes occur on the downside. Typically you'll see a series of those 90 percent downside days during the last phase of an important decline.
YASTINE: Desmond says thus far the selling has been orderly, too orderly.
DESMOND: For example, in the '62 market we saw nine 90 percent downside days before we reached the low. In 1974 we saw fourteen 90 percent downside days before we finally reached the lows in December of '74. To this point we haven't seen a single 90 percent downside day.
YASTINE: Other chart watchers look at another expression of investor sentiment. Its called the volatility index, or VIX. It measures the numbers of puts and calls purchased on the Chicago Board Options Exchange. Forty indicates extremes of investor fear, and it has coincided with each of the rallies in the NASDAQ since the bear market began in March of 2000.
PRICE HEADLEY, FOUNDER, BIGTRENDS.COM: So we think that we need to see a volatility index reading up to the 40 level or higher. That means that volatility is up to 40 percent or more in people's minds. They're expecting a more volatile market. By the time people expect such volatility, usually the downside volatility is already passed.
YASTINE: The VIX finished at 33 today. Headley thinks we will get a summer rally starting as soon as perhaps next week with a final spike in volatility shifting him from bearish to bullish.
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Is there any technical data for 90 % down days on NAS and if so what are they indicating now ?
I am wondering as to why is this not included by Desmond when looking for market bottoms. In 60s-70s, NAS was not a dominating index ?
Note that Price Headley has been mostly bearish on NAS, if I recall correctly, since Jan. This could mean either of these two things :
Bears have covered, otherwise it would not be public info. So the July run could not be huge.
or
This is just the start of covering phase. In that case July run could be significant. |
