Christopher:
This is what Accompora was saying on Tuesday morning:
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February 16, 1999, 10:20 a.m. EST
Prices as of close on 02/12/99
U.S. Stock Market Outlook
Near-Term
Last week the Dow successfully bounced off its primary support in the 9100 area. We believe this is both good and bad news. Its good news because it shows that this average has the ability to hold up under selling pressure; its bad news because it is masking the real damage that is taking place below the surface. For example, if one were to look at the chart of the daily NYSE Advance/Decline Line, he or she would notice that it is practically back to its own October 8th, 1998 low (this would be comparable to the DJIA at the 8000 level and the S&P 500 back to its 1050 area).
As technicians our primary job is to watch the major trends and to report whenever any of these important trends are broken. Last week several key market indices broke their respective uptrends. These uptrends have been in force since their October , 1998 lows: the S&P Small Cap index, the S&P Mid Cap average, the Russell 2000 and the Value Line Composite, to name a few. This type of behavior is expected due to the fact that these barometers all had significant advances over the past four months. Therefore it is perfectly normal to see a near term pause (or correction) develop at this time. Look in the Sector Standing section for the names of those groups that also broke their uptrends this past week.
Due to the fact that there are fewer tech type stocks within the DJIA, it is reasonable to expect that the Dow Jones Industrial average will do better on a relative basis during declines than most other averages. It is for this reason that we are once again inserting the word "stealth" into our market vocabulary. "Stealth" means that the DJIA will not be as vulnerable during any correction despite the enormous drubbing taking place below the surface. This type of disparate behavior is common during secular trending bull markets. Thus we do not consider ourselves bearish—we are in the camp of those who believe that it is healthy and natural that the market undergo a normal pause at this time.
Today the futures are up strong before the market's opening, suggesting that we could have a positive upward bias, at least early during the session. This near term strength is part and parcel of the trading range that is in place. Note the support and resistance levels in the next paragraph--they will serve as excellent high/low boundary ranges for these key market averages. As long as the support levels hold, the ranges will stay in effect.
Realistically, we would still prefer some near term consolidation. We think it only reasonable that the market takes time out to digest the enormous gains it realized since the October 8th, 1998 lows (in just four short weeks the Nasdaq Composite was up about 75%, the S&P 500 gained a little over 30%, the DJIA advanced approximately 24% and the Russell 2000 rallied about 35%).
If we could sketch out or establish ideal near term trading ranges for these key averages they would look like these:
Dow Jones Industrial Average
Primary Support 9063.26 (1/25/99)
Secondary Support 8676.03 (12/14/98)
Primary Resistance 9480.09 (1/20/99)
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