JULY 20 INDEX UPDATE
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SHORT-TERM TECHNICAL READINGS:
DOW - lower midrange/borderline oversold
SPX - lower midrange/borderline oversold
OEX - lower midrange/borderline oversold
NAZ - lower midrange
NDX - lower midrange
VIX - 22.44, midrange
CBOE PUT:CALL RATIO - .61
If the market continues down, it would take one more down day to get CLASS 2 BUY signals, and two more down days to get CLASS 1 BUY signals. So we are close to a short-term bottom. In light of the recent bullishness, I would not be surprised if the market/sectors was to bounce today, but if it does bounce today I suspect that it would not last and be only a 1-2 day bounce and then selling to resume where a CLASS 1 BUY signal would register. As mentioned previously, I am not expecting a strong sell off just yet, just a normal sized pull back.
The 3-DAY PATTERN is where we get 2 STRONG moves in the same direction, where it could occur in either pattern:
1) STRONG DOWN(day 1) - FLAT(day 2) - STRONG DOWN(day3) or
2) STRONG DOWN - STRONG DOWN - FLAT
So the NAZ/NDX fullfilled the 3-DAY PATTERN; however Im not sure about the SPX/OEX. The SPX/OEX was down 11.78/4.24. The SPX is a flip of a coin as to being flat or down strong, but the OEX was relatively flat, being down only 4.24 points. So Im not sure.
For the mid/longer-term view, I feel that the SOX(semiconductors) may give a hint as to whether the selling in the NAZ could intensify creating LOWER LOWS down the road. The 3 main/largest HiTECH sectors which fueled the mania were the INTERNETS/SOX/BIOTECHs, but since the lows in spring only the SOX and BIOTECHs have recovered significantly as a group. Since the SOX is the larger in market cap than the BIOTECHs, I believe that the SOX is now the main key as to how the NAZ performs. Over the last 2 days the SOX has sold off slightly stronger than the NAZ on a percentage basis which could be a hint of what could follow if that pattern continues. Im not saying that it is conclusive, just saying it should be watched. Another reason Im watching carefully for further weakness in the SOX is that it formed a BEARISH ENGULFING pattern on MON/TUE. Bearish engulfing patterns, sometimes are hints of strong moves to the downside - not conclusive just a hint.
The NAZ/NDX/SOX are sitting right on the UPWARD TRENDLINE which started in MAY; therefore I would not be surprised to see a bounce today. But if that trendline gets pierced to the downside, it would imply further downside. Also keep in mind that such trendline is also the LOWER TRENDLINE of the BEARISH WEDGE, so a break of that trendline could imply even more negativity since a break of a chart formation is normally followed by a strong move in the direction of the break.
If we do get a bounce in the HiTECHs today, watch how the SOX performs. If the SOX lags the NAZ during the possible bounce, that could be a negative hint, I ONLY SAID HINT. |
