Rally ahead ? Analysis - Tuesday, January 2, 2000 8 p.m.
Last week we stated that we expected a short-term high
near December 27, plus or minus 1 day, and then a decline into
January 2, plus or minus 1 day. The Dow reached a closing high
of 10868 on December 28, within one day of our target. The Dow
has since fallen 222 points to a closing low today of
10646.15. The action in the Nasdaq has been even more
dramatic. The Nasdaq reached a closing high of 2557.76 on
12/28,also within one day of our target. The Nasdaq has since
fallen 10.39% to a closing low so far of 2291.86
today, January 2.
We are still on a short-term sell signal from last Friday.
When that signal was given it was the first sell signal since
the December 21 print low of 10299, The Dow in fact rallied
618 points to a print high of 10917 on December 21. We have
since fallen 331 points from that print high to today's
print low.
We told you last evening that any decline below 2436 in
the Nasdaq would signal that an even stronger decline was
coming this week and a potential test of the critical support
at 2288. The Nasdaq broke 2436 this morning and broke below
2288 this afternoon. The break of these support levels was
the signal that significantly lower prices were coming short
term in this time frame. The Nasdaq reached a low today of
2273.07. Today's decline in the Nasdaq turns our most
important Gann Chart, the Gann Yearly Chart, down. That is the
first time this chart has turned down in years. The downturn
in this Yearly Chart does not in itself mean we are going
that much lower short-to-intermediate term. Its significance
is to the longer term, not the short-to-intermediate term. The
Nasdaq could still begin a major rally at some point this
month, as we expect it will. That rally should be strong
enough to cause most investors to expect new highs in the
Nasdaq. We do not believe the Nasdaq will see new all-time
highs this year. However, we do not want you to assume that we
are very bearish on the Nasdaq from here. We still believe
the Nasdaq will begin a major rally at some point this month.
That rally should be strong enough that if you have not sold
your long positions in the Nasdaq already, you will want to
hold current positions for now. We believe the rally we
expect to begin early this year in the Nasdaq will be a major
one, even if the Nasdaq fails to reach new highs. That rally
could ultimately take the Nasdaq back up fairly close to its
prior all-time highs. Before that rally is over, most
investors will believe the Nasdaq is back on its way to new
highs. That will be the time to sell long positions in the
Nasdaq.
Very short term, the key will be whether the Dow can hold
above 10598 on a print basis and 10480 intraday. Of the two,
that intraday number is the more important. If those levels
are broken the Gann Weekly Chart will turn down. That
normally signals that an even stronger decline is coming
short term.
At this point we cannot conclude we have seen the low we
expect in this time frame. We are so oversold in the Hourly
Charts that a brief rally could begin at anytime. However no
buy signals have been given to this point, so take no new
action until we give you a signal. |
