from Ralph Acampora, Friday, Oct 15:
Producer Price Index numbers are due out today. If they are stronger than expected, then a reason to sell the U.S. equity markets further exists. Be careful in terms of DJIA support, which resides at the 10,081 level. A break below that on a closing basis would indicate a level down to the 9,600 area. We are at the same time, short-term extremely oversold and a snap back rally can occur at the extremes. We still have earnings next week and todays
volatility is being exaggerated by options expiration. Next week, we also have Consumer Price Index (C.P.I.) numbers coming out on Tuesday. Again, we are not too surprised with this market as the direction of the US Dollar and its negative impact on bonds are causing the poor trends in the equity markets.
Currently we are oversold and due for some kind of a bounce-but the key thing to remember is that the averages must hold above their recent (September) intraday lows: DJIA = 10,081, Russell 2000 = 413 and the S&P 500 = 1254. We should hold, at least for a short while above these levels-this action represents a test of the lows. But the internal numbers are still very disappointing; for example, yesterday we witnessed 338 new 52 week lows on the NYSE
and a new low in the accumulated NYSE Advance/Decline line. Both suggest that more stocks are suffering damage. This decline is not over!! We need much more evidence before we can call the recent low, the final bottom.
In our recent comments we gave the market three possibilities:
First probability is a 10% chance that we saw the low and that this market will go to new highs.
Second probability is a 30% chance that we saw the low and that the DJIA and S&P 500 will maintain a neutral trading range between now and the end of the year.
Third and highest probability (60% chance) that the September lows will not hold and that we get another sell off to the low 9000 area on the Dow.
In the meantime, we can not stress enough how important individual stock selection is at this time-look at the "Attractive Stocks" section below for good looking buy ideas.
Ralph sure has himself well covered here. |
