Analysis - Wednesday, August 1, 2001 8 pm
At the highs today the Dow was up over 77 points,
reaching a print high of 10599.96. The Dow then turned
down, and at the lows was down 38 points for the day. The Dow
closed down 12.80. The Nasdaq was stronger than the Dow on a
percentage basis today, and closed up 42 points.
Today's action was no real surprise to us one way or the
other. While the Gann 3-Day Chart turned up last
Friday, signaling that higher prices were coming this week, we
still expected corrections, like we saw today, to occur this
week. We have seen nothing so far to convince us the rally
has ended, despite today's down close.
The 3-Day Chart turned up last Friday and it could not turn
down before Friday of this week, no matter what the Dow does
tomorrow. If the 3-Day Chart turns down on Friday it will
suggest that a sharper correction is coming early next week.
If it does not turn down on Friday it will suggest that even
higher prices are coming early next week before the pullback
we expect into August 9, plus or minus 1 day. After the low
due near August 9, plus or minus 1 day, an even stronger rally
should begin which should peak near August 20, plus or minus 1
day.
From here on the Gann Monthly Chart will turn up on any
rise above 10759 intraday and 10680 on a print basis in the
Dow. If that occurs it will signal that even higher prices
are likely intermediate term. Now, if the Dow rises above
10759 intraday from here it will not necessarily mean that
higher prices are coming over the very short term, by which we
mean the next few days. The Dow could rise above 10759
intraday and then begin a short-term pullback the same day.
However, a rise above 10759 intraday would signal that higher
prices were likely over the next few weeks, regardless of any
short-term correction.
From a momentum standpoint, the Dow is not even remotely
overbought. For instance, the 5-Day RSI on the Dow closed
yesterday at 60.64. The 5-Day RSI does not even reach mild
overbought territory until it exceeds 70, and that has not
occurred as yet. The McClellan Oscillator does not reach
overbought territory until it exceeds +100, and we are no
where near +100 at this time. The MACD is still on a buy
signal despite today's pullback. The Directional Movement
Indicator is also still on a buy signal, despite today's
pullback. Today the Daily Advance/Decline Line closed within
an unofficial 297 issues of reaching a new high for the
year, which is also bullish. It does not mean the Dow must
close higher tomorrow, but it does suggest the main trend is
still up, which is bullish.
At this point we expect a further correction to come in at
some point tomorrow, but the trend is still upwards, so we
still look for higher prices. |
