Peter Eliades' Stockmarket Cycles Update Wednesday, October 20, 1999.
Look at the front page chart on our October 15 newsletter or look at the same chart on our Current Observation page on our website. It shows the S&P daily close accompanied by what we call the daily Coppock Curve equivalent. It appeared as we were writing our newsletter last week, that the indicator was just a day or two away from breaking major support that has held it up over the past three years. It closed last Friday at 45.08. The readings for the first three day of this week have been 44.88, 44.70 and today's reading of 44.57. Despite the sharp three day rally, it has barely affected the readings --in fact the readings have continued down fairly strongly and it looks like the break this time is the real thing. In order to turn the indicator around tomorrow, for example, it would take a rally to over 1366 on the S&P Cash. That's right, a rally of 6% would be required just to move the indicator sideways tomorrow. This is almost surely a real break down after three years of support at the same level. A break down of the indicator implies a breakdown of the up-trend line from the July '96 low through the April '97 and October '98 lows on the S&P Cash. Today that up trendline is around 1128.50 on the S&P Cash. That is down 12 1/2% from today's close. The implication is that that line should be broken and perhaps very quickly. Lending credence to that possibility are the current trading index readings. TRIN 5 popularized by Jerry Favors, closed today at 4.09, in other words a five day moving average of .818. The Open 10 TRIN is at .88 from yesterday's .86 and the Open 30 TRIN went to a new recent low of .899. That is the lowest most overbought reading in six months. It is just mind-boggling that those reading are occurring as the daily advance-decline line is less than 500 units away from the multi-year low that it made on Monday of this week. Based on that configuration of three year lows on the advance-decline line, and six months overbought lows on the Open 30 TRIN, it would be hard to imagine a more bearish scenario. Incidentally, the Dow 's 372.65 point rally over the past three market days, since last Friday, has been accompanied by a daily advance-decline line which has decline 370 units.
Another item of technical interest, despite the fabulous rally in the Dow today, the number of new lows increased from yesterday's 275 to today's reading of 320. The action is truly unbelievable. Can the market continue to hold up under this incredible rock that is taking place internally? We should know very soon. We should say that all the signposts are not completely negative. The price projections are actually calling for the possibility of higher prices here. We believe there is a good chance that they will be invalidated, but we will watch them for you over the next day or two.
Mutual fund switchers, Rydex switchers are in the Ursa fund. Fidelity Select switchers are in cash. All mutual fund switchers should call after 3:20 p.m. ET and every market evening.
Stock Index futures traders, you shorted at 1285.00 on the December S&P and were stopped at 1294.80 for a $9.80 loss. Tomorrow could be tricky. Stock Index futures are down $7.20 as we come on line around 8:25 ET. Attempt to sell short at 1298.20 market if touched with a stop at 1307.90. If you are stopped out, or if that price is not available, sell short a move below 1276.00 on the December S&P with a stop at 1286.90. If they open below 1276, then you would sell short at the opening with a stop $11.90 above the opening price. No new projections on bonds or the XAU. Have a great day. We'll talk to you tomorrow.
>><< |
