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Bill, It's quite evident that NAZ (and SOX) is in full "heat" right now which is in final "parobolic blow-off stage". DOW is now the NON-CONFIRMING indicator. This may reconfirm next week, but if it does IMHO it will be short-lived (1 day to 2 weeks tops). We still have earnings to deal with (IBM, INTC, MSFT, and DELL), so once we get this out of the way "we get clean again". One possible trading pattern that could fall into place which would precipitate a drop of 15%+ is the following: The market (DOW) drops anywher up to 5% area then rerallies (or attempts to) to new highs. However, (a few) several key indicators turn faulty into this rerally attempt (like a dog dead tired and gasping for breath). Some non-confirmations to look for: A-D index (this weakness showed up in July '90 before the 20% downdraft), low OEX P/C ratios for several days (final capitulation), I will not underestimate the external event "Whitewater or Chinagate", profit-taking starting to occur more frequently after each up-move, which can easily lead to a slow and subtle loss of momentum. Once the momentum boys decide risk outweighs reward, the rules of the game change. DOW 30 Stocks will lead the next move down. JT |
