August 8, 1999
Last week, the Dow Jones Industrial Average was up 58.88 points to 10,714.03
(+0.55%), the Nasdaq Composite was down 90.52 points to 2547.97 (-3.43%),
the S&P 500 was down 28.43 to 1300.29 (-2.14%) and the Russell 2000 index of
small cap stocks was down 16.73 to 428.04 (-3.76%).
For the year, the Dow is up +16.69%, the Nasdaq up +16.20%, the S&P up
+5.78% and the Russell 2000 up 1.44%. The StockMotions Newsletter Tracking
Portfolio is up 34.45% for the year. To automatically receive portfolio
updates before they happen, you may sign up at:
stockmotions.com . [During the week, it
added a position in NVLS.]
At the risk of repeating myself, below is a piece from last week?s
newsletter:
"""Now the keys to watch (should we get this relief rally) are the following:
- heavy volume
- whether or not the Dow can break through its 50 day MA
- more advancing issues than declining ones
- decrease in the number of new lows
- DECLINING INTEREST RATES
If the Dow does break above its 50 day moving average on significant volume,
then the worst will be over for now. However, if during any rally, the
above aren't happening, then the best advice is to get the heck out of this
market. This is why I started this newsletter by saying that we are at an
inflection point.
By the way, I can't stress enough the importance for the long bond to get
back towards 6.00%. It made another run at the 6.10%+/- area late this
week, but managed to settle a bit below that?.but again not much breathing
room."""
[now back to this week's newsletter]
We did get a rally in the middle of the week. However, each attempt at
reaching its 50 day MA, the Dow simply couldn?t push through. Of the five
keys to watch, only volume was a slight positive for those looking for a
turning point?.all else didn't look good. The breakdown in the NYSE A/D
line was a significant event this week. It closed Friday at
43,191,breaking below the low of March 23, 1999 (45, 427) and that of
October 8, 1998 (46,426)..each bringing a lower low. As a matter of fact,
this indicator isn't too far from the correction low of 41,166 on April 14,
1997. Next support on this chart should the 41,166 be broken would be
26,174 of the July 29, 1996 correction low. By the way, the all time high
on this indicator occurred on April 15, 1998 (80,979). Looked at in another
fashion, over the past 331 market days, the cumulative A/D line has declined
by 37,788 - put another way, there has been an average 114 more declining
issues than advancing ones on the NYSE on a daily basis since the peak.
Late in the week, rumors surfaced about more hedge fund troubles?.this seems
to have created some rather large spreads in bonds - not a good sign.
Saturday morning, I saw a news report stating that 40% of mutual fund
investors are concerned about what will happen with their money with respect
to Y2K concerns (maybe why there was a large outflow in equity funds during
the past week).
The Internal Indicators
First the positive ones - the put/call ratios on the CBOE are not in super
bear territory. Looking forward, earnings still look to be rather healthy
for the rest of this year and into next. Most of the rest of the internal
indicators are in deep bearish mode.I am simply finding it hard to justify
staying in this market.
What the heck does all this mean?
At the risk of sounding bearish, it might not be a bad idea to continue to
sit on the sidelines for the time being...however, if a sector sells off hard
during any morning, like the Nets did on Wednesday, look for some sort of
immediate rebound. Thursday's action in the net stocks was classic.
Something tells me more pain is on the way.
What would turn me bullish again is a washout on heavy volume and lower
interest rates.
If any reader has any question about the markets or any internal indicator,
please send it to market_questions@stockmotions.com .
The Major Moving Averages
For those who are interested in the moving average levels, here they are.
As of the close on Friday, August 6, 1999: The Dow's 200 day MA is at
9814.10, its 50 day MA is 10842.40. The 200-day MA is in an decelerating
uptrend and the 50-day MA is flat to declining. The Nasdaq 200day MA is
2355.50, and its 50-day MA is 2615.70. The 200-day MA is in an up-trend,
the 50 day MA is also rising. If any reader would like to see the charts
that indicated the relative movement of the 50 day MAs on the Dow and the
Nasdaq, please click on
stockmotions.com for the
Dow and
stockmotions.com for
the Nasdaq.
NOTE: The Dow has closed below its 50 day MA for seven consecutive days.
The Nasdaq has closed below its 50 day MA for four consecutive days -- step
aside, my friends. |
