To: Options Jerry who wrote (42507)
From: IntelligentSpeculator.com
Tuesday, March 7, 2000 5:47 PM
ET
Reply # of 42546
Finally wrote a The Trader's Notes for March 8, 2000
We first began to write about a churning top late last year as the Dow
Industrials and the S&P 500 treaded water, and the NASDAQ began its
lone ascent unconfirmed by any of the major averages. It has been pointed
out by many observers that the Dow Industrials has been trading inside a
pattern known as the Broadening Top, which many see as the ominous sign
that conditions similar to that of the 1929 top are present in today's market.
We would like to point out a second possibility. With yesterday's break of
the February lows, the Dow Industrial Index is still testing the October 1999
bottom on the weekly chart. If this week holds, we could take the lower
boundary of the broaden top and call it a neckline on a huge head and
shoulders pattern that could stretch for several more months into the future
before a final resolution. For now, resistance on the Dow Industrials is
lurking at the 20-week EMA at 10680 and the 50-week MA at 10830.
The S&P 500 Index is in the process of testing the uptrend line established
in late 1998 with resistance in the 1400 area. The NASDAQ 100 Index
remains in an uptrend on the weekly chart, but big around numbers like
4,500 are good places to find sellers. Until last week's low of about 4,000 is
broken, it is still in an uptrend, making weeks of higher highs and higher
lows. The most mysterious major index is the CBOE Internet index, which
tried to break out last fall, and has been consolidating ever since in a very
tight flag pattern. Until the trading range is resolved, there is nothing to do
here.
We take a quick look at the divergence between the Dow Industrials and the
Transports. Perhaps there has never been as great of a disparity between
the two indices in modern times. While it is almost old fashioned to look at
these two indices in the same chart, we still wonder about why this is so.
While the Death of the Old Economy has been proclaimed, given that
billions of dollars of merchandise purchased online needs to be transported
to their buyers, one wonders why transportation companies are not doing
better. They would surely be able to pass on the price of increased fuel
costs without much trouble. Or is the economy much weaker than we are
lead to believe, and this is the first sign of trouble?
Perhaps the rally in bonds, producing lower yields, is telling us something?
The Trader's Notes prepares the trader for the day ahead, providing
observations on market sentiment, internals, support/resistance levels
and key pivot points in the major market indices using the daily chart.
Use of moving averages and the Average Directional Index (ADX)
indicator helps to determine whether the market is trending up/down
or chopping sideways. Using Japanese candlestick charting techniques,
observation of market action around support and resistance assists in
the analysis of supply and demand based on fundamental principles of
classical technical analysis. The results set up "if-then" scenarios used
by the trader during market hours.
Technical analysis is not used as a tool to "predict" the future or to
pick tops and bottoms. It is used to detect areas of trend change and
emerging trends. In a trading range, traders generally look to buy at
the low end of the range and to sell at the high end of the range ? or
stay out all together. In a trending market, traders generally look to
enter the market on every retracement until it enters a trading range
and ends on a test. The goal is to buy every dip in an uptrend and sell
every rally in a downtrend. The trend is your friend until the end when
it bends!
Charts specific to this post are linked to
intelligentspeculator.com. |
