Shepler Capital Management: Weekly Outlook for 9/13 - 9/17/99
MORE RALLY COMING
In our 9/6/99 commentary we stated:
"...the market appears to be headed for a re-test of the
8/25 high at a minimum, and quite possibly a trip to new
highs. Our cycle work now points up strongly into 9/27 +/-
3 trading days, with a minor cycle high due 9/14 +/- 2
trading days... Seasonality will also be favorable during
the 9/11-9/20 time period according to the "buy on Rosh
Hashanah, sell on Yom Kippur" rule, coupled with the
positive expiration week bias. And then finally we get
end-of-quarter "window dressing" into month-end... So, we
are inclined to favor the long side of the market over the
short side this month, as the most bearish outcome we would
expect this month would be a sideways trading range, with
the most bullish outcome being a blow-off rally to new
highs. "
Last weeks action was fairly uneventful, as the market
basically traded in a narrow sideways trading range all
week long. The market appears to be consolidating after
last Friday's huge gains, and there may be some further
consolidation/pullback going as a result of inflation
jitters going into this Wednesday's CPI report. However, as
stated in last week's commentary above, seasonality, and
cycles favor more rally to come into the late September
time period.
Based on the fact the we are now in the window for our 9/14
+/- 2 trading day minor cycle high, we would expect that
that market will experience a brief pullback at some point
next week.
If the market drops prior to Wednesday's CPI we
would view that as a good short-term buying opportunity for
a final push to new highs into month-end.
However, the "buy the Friday of pre-expiration week trade is fairly reliable and suggests that next week should end up being a good week for bulls when all is said and done. This also agrees with
"buy on Rosh Hashanah (9/11) and sell on Yom Kippur (9/20).
Again, due to extreme over valuation, the risk level is
high for long positions, so we must watch key indicators
closely as we attempt to finesse the final weeks of this
bull run. The McClellan Oscillator is one of those key
indicators, and a drop below the zero line would be of
concern, with a breakdown below -50 being a signal the the
top is in.
Also, the T-Bond yield continues to struggle
with the key psychological level of 6.0%. A drop in yield
below 6.0% would be very bullish for the coming weeks,
while a failure to drop below 6.0% in the aftermath of
Wednesday's CPI report could cause some definite heartburn
for bulls.
As we have stated for some time we do not see a crash or
mini-crash as being a threat until the month of October.
Based on our cycle work, the 10/19 +/- 3 trading day time
frame is the most likely window for a crash or mini-crash
low. So, we will be looking to switch from our current
bullish posture to a bearish posture, emphasizing puts and
short selling come late September, looking for a very
severe drop into mid to late October.
(c) 1999. Bill Shepler - E-mail him at wshepler@yahoo.com |
