Stockmarket Cycles update for Monday, June 4th.
Despite some potential contradictions, we believe the outlook for the stock market remains positive over the short to intermediate term. Perhaps it is a good time to review some of the nominal 20 week projections currently outstanding.
Dow Jones industrials 12,477 ± 340 points
New York Composite Index 726.97 ± 18 points
S&P 500 cash index 1,446.15 ± 37 points
Those projections were generated four-five weeks ago. Because they are nominal 20 week projections, they will be overdue quite soon, but let's not be in a rush. Until or unless we see evidence to the contrary, we will assume those projections will be met.
The evidence from the Trading Index makes it easier to believe that the above projections will be reached. First of all, there was a classic reading above 1.50 in late March indicating the possibility of an important bottom being imminent. Over the past week or two, there were additional Trading Index readings suggesting the market is historically oversold. As recently as today, the Open 10 TRIN closed at 1.20. This is a rare oversold reading the likes of which have been seen over the past 19 years almost exclusively in the area of important bottoms. From August of 1982 through the remainder of the 1980s, there were only three such readings. They occurred in August 1982, November 1982, and October 16th and 19, 1987. In the 1990s, a reading higher than 1.20 on the Open 10 TRIN occurred in only six time periods. One or two of them were slightly premature, for example August 23rd, 1990, but they were all closely related to important market bottoms: January 1991, September 1991, February 23, 1993, December 1997, and late September 1998. They have become more plentiful over the past year, and we believe that is one more sign of a long term bull market rotating into a long-term bear market. Over the last year, Open 10 readings higher than the 1.20 occurred on July 6th, 2000, November 30th and December 1st, 2000, December 27th, 28, and 29, 2000, and have now occurred in 2001 in the months of January, February, March, and now June.
The 10 day Trading Index closed today at 1.30, with TRIN 5 at 6.31, and the New 10 TRIN at 0.88. The McClellan oscillator moved handily into positive territory with a reading of + 23.6, giving a positive short-term signal.
Rydex switchers are 100% in Rydex Nova Fund, Fidelity Select switchers are 100% in Cash. All mutual fund switchers should call the telephone update each market day after 3:20 p.m. Eastern time and call each market evening.
Stock-index futures traders-through noontime Eastern time tomorrow, exit your long position in the June S&P futures only if there is an hourly or half hourly cash reading below 1254.10. After noontime Eastern time, exit your long positions only if there is an hourly or half hourly reading below 1258.30.
There are no new projections for the XAU or for bonds . That's it for now. Have a great day. We'll talk to you tomorrow.
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