Morning Market SnapShot for Wednesday, July 7, 1999
Yesterday was a reversal day for most market indices. The market opened up and made new intraday highs, but by the end of the day, most indices closed lower than where they opened. This is a signal that a short-term pull back may be in the works. Another down day today is needed to confirm.
The Dow Industrials formed a long legged doji on the daily chart, indicating indecision. The S&P 500 Index made a black shooting star and closed below last Friday's close. The NASDAQ 100 did the same. Treasury bonds have made a third inside day of a consolidation at the 20-day exponential moving average. We must watch a few things carefully. The first are the highs made in April and May. If the market pulls back sharply and trades below the old highs, many market participants will conclude that this run was a false breakout and make a quick exit. If this happens, we will be watching to see if the 20-day exponential moving averages hold support. The 20-day EMA is at approximately 10,825 for the Dow Industrials, 3,425 for the Dow Transports, 2,225 for the NASDAQ 100, 502 for the CBOE Internet Index, and 1,345 for the S&P 500 Index.
We noted that the CBOE market volatility index, the VIX, made a low for 1999 last week. Low VIX indicates a lack of fear in the market, with most participants acting in a complacent manner. The market highs made in July 1998 were made on the lowest VIX of 1998. At this point, we need to monitor market internals very carefully. A rapid increase in the number of new 52-weeks lows on the NYSE with a corresponding decrease in the number of new 52-week highs would be the first sign of internal deterioration. We will keep you up to date.
Charts specific to these comments have been posted to intelligentspeculator.com |
