Stockmarket Cycles update for Thursday June 1st.
Today's stock market action definitely places any short term bearish
outlook in jeopardy. The nominal 20 day downside projection on the Dow
industrials was apparently invalidated on the intra-day projection charts
today, but it was too close a call
to be confident about. The main reasons, however, for not throwing in the
towel on the bearish case are the outstanding downside projections on both
the Nasdaq Composite and the Dow industrials. In fact, in reviewing the
Dow Jones industrials
theoretical intra-day chart, it turns out the nominal 20 week projection
calls for a move down to 9587 on a theoretical intra-day basis.
There is, however, a potentially bullish case to be made. Today was the
second day out of the past three days to post very good breadth figures.
The CI-NCI ratio closed today at .944. This indicator is sending us a dual
message. The reading is
low enough to substantiate a major bottom in the Stockmarket. On the other
hand, the fact that the very low readings were being registered as some of
the market indices and averages were making new all time highs over the
past few months should
ultimately prove to be very bearish.
As a quick editorial comment, we should note that our colleague Richard
Russell stated on his web site today that this was the most difficult
market he had ever dealt with. Richard is the dean of newsletter writers,
having started his newsletter in
1958. Richard maintains that we are in the early stages of a bear market,
and that the second stage of this bear market will not begin until the Dow
closed below its March 7th close of 9796.
On a technical basis, the important level to watch on the Dow is between
10,787 and 10,805. There are three relatively important moving averages
encompassing those numbers, with the 50 day moving average at 10,787, a 200
day moving average at
10,789, and a one year moving average of 10,805. The S&P 500 Index, on the
other hand, remains above 2 of the 3 of those equivalent moving averages,
but it has rallied right up to its 50 daily average which closed today at
1450.07. The bottom line
is that the market remains in an indecisive mode, and it will take more
evidence in one direction or the other to make a more bullish or bearish
case.
Mutual funds switchers- Rydex switchers are in the Ursa Fund, Fidelity
Select switchers are in cash. All mutual funds switchers should call the
telephone update each market day after 3:20 p.m. Eastern time and call each
market evening .
Stock-index futures traders-the intra-day projection charts allow for the
possibility, if not the probability that the June S&P futures move to the
1483 area and possibly as high as 1510. Because the market is at least
short-term overbought, we will
not chase that kind of rally, but should there be a positive reaction to
tomorrow's early-morning news, we're willing to sell short the June S&P an
any reversal of over 14 points from a high above 1483. The stop would-be
3.70 above the high of the
day at the time of the short sale. |
