Analysis - Sunday, Dec. 24, 2000 7 p.m.
The market followed our forecasts for last week fairly
well. We looked for a high near Tuesday, Dec. 19 and then a
decline which should bottom near Thursday or Friday of last
week. The Dow reached a print high of 10785 on Tuesday,
December 19 and then fell 486 points to a low of 10299
on a print basis on Thursday of last week. The Dow then
began a rally off Thursday's lows, so far rising 341 points
to a print high of 10640 on Friday, December 22. This too
was in line with the Cycles forecast.
The Nasdaq plummetted last week to a low of 2288, in line
with our forecast for a severe short-term decline once 2596
was broken on December 19.
We must tell you that as difficult as the market was last
week, it could have been a lot worse. Our Gann 3-Day Chart and
our Gann Weekly Chart were pointing down last week, and while
these were not actual sell signals, they did both suggest that
even lower prices were coming short term last week. About
that, they were both quite correct.
As we told you last week, there were certain indicators
which suggested that we were near a low on Dec. 20, and that
some sort of at least short-term rally was due. The Trin -5
reached a high last week of 7.04 on December 20, and that was
one of the most oversold readings of the year. The Trin-5
normally suggests you are near at least a short-term low when
it rises above 6.00.
We told you that we expected the Dow to find support to any
decline last week down near or just below the bottom of our
21-Day 3 1/2% Exponential Trading Band. The bottom of that
band on December 21 was 10218. The Dow reached an intraday
low of 10158 that same day, just below the bottom of the band.
That day has marked the intraday low so far.
There are a few indicators which suggest any rally early
this week will be relatively short lived. For instance, the
McClellan Oscillator reaches overbought territory above +100.
On Friday it closed at +83. Stix reaches overbought territory
above 50, and on Friday it closed at 52.26.
The 5-Day Advancing Volume is also one of our key
indicators when prices are moving upwards. We are not yet
showing the kind of bullish readings in this indicator which
normally occur near short-term highs. But the current
readings are by no means bearish either.
Another indicator which we believe carries potentially bullish
implications is the 5-Day Moving Average of New Highs. This
indicator has been rising steadily since its 10/19 low. On
Friday, December 22 it closed at 204, its highest level since
4/8/98, over two years and eight months ago. In a true Bear
Market this should not be happening. To appreciate the
significance of the action in this indicator, imagine a Bull
Market during which there were consistently more stocks
reaching new lows than new highs for over two months. Would
you truly call such a Bull Market strong? We have the
opposite situation present today, and the opposite conclusion
is implied.
We have told you that the Cycles call for the next short-
term high near December 27, plus or minus 1 day and then
short-term low near December 29, plus or minus 1 day. The
Bradley calls for the next important low near January 2, plus
or minus 2 days. This suggests some sort of important bottom
is likely within the last two trading days of December, to the
first two trading days of January. That low may be higher or
lower than the low seen last week. In any case, we will
probably want to raise long positions for stock traders and
mutual fund switchers as close to the low due in that time
frame as we can get.
The Gann 3-Day Chart turned up on both the Dow and the
Nasdaq on Friday. That is short-term bullish. From here the
important Gann Weekly Chart will turn up on any rally above
10866 intraday and 10785 on a print basis in the Dow this
week. Of the two, the intraday number is the more important.
That would be an even stronger bullish signal if it occurs
this week. |
