Thank you for the response on VSH
Needless to say I am watching very carefully. Strong resistance at 35 will buy some more if holds above that line. I have a stop in at 27
About RMBS the lower trend line has been broken ( however bounced back above that line) so will have to take any future gains in smaller increments. Also see stronger support at 62 then if that doesn't hold 44 then somewhere around 33 to 35.
I don't see much reason for any long time position right now. Trying to take small little bites.
I found some interesting reading I though I would share. Of course you can always find some one that supports your own viewpoint nowadays.
However if you look at the Naz chart you can see that we are at the crux move on the NAZ. The triangles are getting smaller.
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The Dow broke short-term resistance on the daily chart, but came up a little short on the weekly chart.
Two strong weeks brought the Dow to the brink of weekly breakouts on both price and momentum. However, the trend line extending down from Jan-00 remains intact and keeps the average within the confines of a Diamond (or broadening formation or symmetrical triangle). The monster trendline extending up from Dec-94 holds up the lower end of the Diamond. As I stated earlier this week, Diamonds are not necessarily bearish formations. I would prefer to consider them neutral consolidation periods that are not confirmed as bullish or bearish until there is a breakout. The right half of the Diamond is a symmetrical triangle, which is a neutral consolidation pattern. Even if the Dec-94 trendline were to be broken, support at 10,300 appears quite robust and I would label this as the last line of support. Since the Jan-00 high (point 5), the average formed a lower low (point 6) and the ensuing reaction rally has so far come up short of the Jan-00 high. The last line of resistance has been placed at 11,200, a break of which would question any bearish bias remaining. Momentum improved with recent strength and the PPO reached resistance from its previous high and trendline extending down from May-99. Even though the price relative has improved the last 6 weeks, it remains below its previous reaction high and the jury is still out on the long-term prospects for the Dow.
The weekly chart of the Nasdaq 100 ($NDX) looks most ominous.
Last week I alluded to the Bump and Run Reversal (BARR). This assessment remains and the Nasdaq 100 ($NDX) appears headed for a test of support around 3100, possibly lower. The BARR is made up of three parts: lead in, bump, and run. The lead-in phase began in May-99 and continued through to Oct-99 to form the basis for the main trendline. The bump started in Oct-99, carried the index above 4800 and then below 3000. The bump represents a euphoric advance that is unsustainable and rolls over. BARR is not complete until the reversal is confirmed with a break below the trendline. A bounce off the trendline is not uncommon and this would appear to the case with the May low around 2900. The reaction rally off of support at 2900 appears to be coming up short and a lower high could be forming. At this stage of the pattern, the downhill run is about to begin and could take to index to support between 2300 and 2500. Weak momentum appears to be confirming the lower high. The PPO barely recovered to positive territory and has already turned back below its 6-week EMA. Relative to the S&P 500, the Nasdaq 100 does not seem the place to be. While the Nasdaq 100 retraced 62% of its decline, the price relative only retraced 38%. The Nasdaq usually outperforms on market advances. When things don't happen as usual, it is time to start thinking about the ramifications.
The S&P 500 ($SPX) continues to be torn between tech and non-tech.
Just as the Dow and Nasdaq 100, the S&P 500 remains above its long-term trendline extending up from Dec-94. Even though the price chart has taken on different patterns, key support levels for all three indices are close at hand. After much staring, contemplating and drawing, I came up with a head and shoulders pattern for the index. Although not a perfect example, the basic form is there. The right shoulder took on an extra bump with the July break above 1480, but the index came right back through and resistance at 1480 was re-established. There was an attempt to move back above 1480 this past week, but the breakout failed and a short-term reversal occurred. The neckline slopes up and this lessens the potential bearishness of a pattern. Neckline support comes in about the same place as the previous reaction low at 1415. A break below 1415 on a weekly closing basis would be bearish for the index and I would look for an immediate test of support at 1350. Because markets fluctuate, there could be a bounce off this level and a lower high could form around 1400. After that we should be nearing the mid-Sept period and there could be a test of support around 1220. The PPO has started to form the contracting wedge, much like RSI. The recent highs in both were significantly lower than the March highs and both have started to turn lower.
NYSE market breadth statistics turned in a mixed performance, but retain a bearish flavor.
While the NYSE Composite ($NYA) closed at a new all-time high of 665.70 on Tuesday, some key AD Statistics and AD Volume Statistics failed to make new highs. The AD Ratio and its 5-day SMA both formed their second lower high in the last two months. The AD Line, which reached a new high in July, appears to be forming a lower high in August and did not confirm the recent high in the NYSE Composite ($NYA). The AD Volume Statistics show virtually the same patterns and the Smoothed AD Volume Ratio remains below 1.2. Taken together as the TRIN, these same statistics may confuse the picture over the short term, but still point to the bear over the long term. The TRIN recorded a new reaction high on 1-Aug at .67, but failed to surpass this level on the latest advance from 640 to 665. With a series of higher troughs and higher peaks, there is a slight bullish bias in the smoothed TRIN over the last 5 weeks. Since the March peak at .79, the May (.83) and Aug (.92) peaks have been lower (keep in mind the inverted scale), and a bearish bias remains over the last 5 months.
Nasdaq breadth statistics failed to confirm the July high and have yet to recover.
Even though the AD Line has not been the best predictor of Nasdaq action over the last few years, the AD Ratio has remained a good indicator for short-term swings. Generally speaking, an AD Ratio above 1 can be considered bullish and below 1 bearish. It is also important to look for extremes, both above and below 1. In April and May, the AD Ratio spent most of its time below 1 and even below .50. Towards the end of May this began to change and the ratio jumped to 3.07 on 2-June. This sharp move tilted the balance of the AD Ratio back above 1 and bullish. A bullish bias remained until mid July when the ratio broke below its previous lows and reached .50. The ratio ultimately fell to .36 and the subsequent recovery has been less than spectacular. Ideally, the ratio should be able to surpass 2.00 for a bull move to be considered sustainable, and surpass 1.60 at the very minimum. Recent recovery highs in the ratio were 1.26 and 1.30. Perhaps even more ominous is the Smoothed AD Volume Ratio. A reading above 1.2 is considered bullish and below bearish. This key indicator recently moved below its May low and remains around 1.05. As with the NYSE, the Nasdaq TRIN started to present a dilemma with recent strength, but the overall pattern remains bearish. The negative divergence that formed in mid July was being threatened with recent strength, but it appears that a lower peak is forming. A move back below the moving average would be bearish.
stockcharts.com
Good Luck
Don |
