Ths guy has been on the money so far, so here what he has to say this week:
"MEAT GRINDER MARKET
In our 8/23/99 commentary we stated:
"We believe that the market is now in the midst of an
impulsive upleg that will carry to new highs, and that
should last well into our next intermediate-term turning
point date in late September... Of course, with the stock
market at such lofty valuations we must always be cognizant
of the downside risks, and thus must be on guard in case
the market begins to show signs of diverging from our
forecasted path. With the McClellan Oscillator currently
hovering in the neutral zone at the time of writing, we
would view any sharp deterioration in breadth and a trip
back below -50 by the McClellan as a big negative here.
Also, with T-Bonds currently giving bullish signals, we
would view any downside reversal in bonds (upside reversal
in yields) as very bearish. These kinds of negative
developments would alter our intermediate-term bullish
outlook."
After a 9% rally off of the August 10th low, the SPX
appears to have put in at least a short-term top at the
high of 8/25.
From here our cycles call for a short-term
low on 9/2 +/- 2 trading days, so the current pullback
could last well into next week before the market resumes
any rally.
In our last update we warned that a drop in the
McClellan Oscillator below -50 would be a very bearish
development and would cast serious doubt on our near-term
bullish scenario. As this weeks update is being written at
mid-day Friday the breadth situation is deteriorating and
the McClellan is at risk of dropping back below the zero
line, which would be a worrisome development.
(Ure has more on the McClellan below and you can check it during the day at:
decisionpoint.com It was just below zero Friday at -1. - Ed.)
This is especially so considering that it never made it decisively
above the neutral zone (+50 to -50) during this recent
rally phase.
Also, while the recent bond rally has been
impressive, the last two days have seen yields reverse and
begin to creep higher again. If the 30 year bond were to
return back to the 6%+ area, the bulls would likely be in
serious trouble. So, while we are still holding out for new
highs for the major indices in late September, in the end
the market is the ultimate judge and we must remain
flexible in case we are proven wrong.
Even if our breadth and bond market thresholds, as
mentioned above, are broken in the coming days, we would be
very careful about buying into any September crash
scenarios, as our cycle analysis argues strongly against
any such occurance.
One bearish outcome that appears more
likely is that the current rally will take the form of a
contracting triangle "B" wave, with the market whipsawing
in a trading range created by 8/10 low and the 8/25 high.
This type of "B" wave would catch both the "blow-off" bulls
and the "crash" bears in a "meat grinder" market, full of
false starts in both directions. If this "B" wave were to
complete in the 9/27 +/- 3 trading day timeframe, the stage
would then be set for a fairly spectacular crash or
mini-crash type decline into our projected 10/19 +/- 3
trading day low point.
In conclusion, while we are still holding out for new highs
for the Nasdaq and the S&P to join the the recent new highs
in the Dow, the bulls are dangerously close to losing any
near-term upside momentum. If the McClellan closes below
-50, and T-Bond yields climb back above 6%, then the
chances of a blow-off rally into late September will be
slim to none in our estimation.
However, we would be similarly skeptical of any near-term crash scenarios.
If a "meat grinder", trading range market is to be the result
for the month of September, which we find increasingly
likely, then the best place to be for the coming month
could very well turn out to be cash. Such a trading range
market would then be very likely to resolve to the downside
in the month of October, making the post-expiration
September timeframe a potentially ideal time for employing
bearish strategies such as short-selling and put buying.
For now we will be watching the action carefully and
staying flexible." |
