BLACK MONDAY?... (From the Lonesome Bear)
The data for weekly advances and declines (that is the weekly ones) do not come out until very late Friday or early Saturday morning, but it is a good bet that the weekly advance-decline line will be down this week inasmuch as the daily advance-decline line lost around 612 units for the week. If it is down for the week, it will move to a new low for the year at its lowest level since October of last year. Most technicians know the daily advance-decline line has already done that and much worse. The daily A-D line is, in fact, very near a three year low, but the weekly advance-decline line is a different animal and displays historically none of the downward bias of the daily advance-decline line. The fact that the weekly might be going to a new low for the year as the Over the Counter Composite is going to a new all time high, should be viewed very negatively.
The biggest thing to watch for now is our September 13 cycle date due this coming Monday. As we noted last night, it is the NDX, the Nasdaq 100 and the Over the Counter Composite which are ruled by five or six stocks which we would expect to be affected by that cycle date, so look for a potential top in those indices on Monday, plus or minus a day or two. We are amazed at how few technicians are aware, historically, of the market's incredibly weak internal structure as evidenced by both 52 week highs and lows, and by the daily and weekly advance-decline lines. There has only been one period in market history even close to the current one in terms of the underlying technical weakness in the face of new all time highs in one or more of the major indices and that was 1929.
What is somewhat remarkable, is that now there is not only a valuation and fundamental analogy between 1929 and 1999. There is also a strong technical analogy which has been building over the past six months or more. As to all those who claimed that a final blow-off is needed to end such a bull move, we submit to you again, the Nasdaq 100. A month ago on August 10, it closed at 2163.77. Now, exactly a month later, it closed at 2534.59, up 17.1% in one month. Over that same period of time, the daily advance-decline line on the New York Stock Exchange has lost 733 units. It is an incredible blow-off in the face of horrible negative divergences by the daily advance-decline line and it even surpasses the Dow's final blow-off rally of 12.8% into the 1929 top over almost the same period of time. In 1929 it was 25 calendar days. It is much worse this time, however, because even in 1929 the final rally was accompanied by at least slightly positive advance-decline line breadth. The bottom line is we should be there. If the cycle that we noted from 1932 to 1966 to 1999 is exact, it will end Monday, otherwise it should end very close to Monday. In any event, we are in a critical time zone that suggest the possibility of a very major market turn.
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