OCT 1 INDEX UPDATE
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My WEEKLY charts for the DOW,SPX,OEX,NAZ,NDX have all just entered the OVERSOLD REGION. If the market continues down on a weekly basis, I will be getting a CLASS 1 BUY signal either next week or the following week, with the latest for a rebound during the 3rd week of OCT(expiration week). In this senerio the start of the rebound is closer to the 2nd week of OCT.
On purely a mathematical analysis per my system, the better situation would be for a washout next week, so that a MID-TERM BOTTOM is set and we have the potential for a stronger rebound. If the market rallys next week, purely mathematical, the chances increases that there is more downside, and that the downside could be deeper, and that the mid-term bottom wont come until the end of the month rather than the 2nd/3rd week of OCT.
Of course this doesnt mean that there is no possibilty that a strong rally cannot start right from here, just that it is less likely. Please keep in mind that I deal with probabilities not absolutes as many others do.
On Friday I was asked whether I would add to my short position in the mutual fund trades in light of all the negativity, and my answer was no. The reason I did not add was that I try to maintain my discipline of only opening trades(unhedged positions) on CLASS SIGNALs. Whether I felt the market was going lower, I will stick to my discipline. Yes I will miss opportunities, but hopefully it will also limit the amount of WHIP-SAWs.
As for preparing for this forthcoming MID-TERM/IMPORTANT BOTTOM, I will be going LONG strongly. However, that doesnt mean that I expect the rally to be strong and last long - I dont know. The reason that I will be going LONG strongly is that the probability of a rally after that mid-term bottom is very high, just dont know the extent of the rally, nor do I care since Im a swing-trader.
My position still has not changed for over 1.5 years and that is that the overall market is still in a trading range.
NOVEMBER begins the seasonality of the strong 6-month period of the year, and if the overall market cannot break out to the upside while the seasonality issue is on the side of the market, I would interpret that as a sign of weakness/lack of strength which could lead into further weakness in 2001. So, Im not saying that NEW HIGHs cannot be set, just that if NEW HIGHs are NOT set in the NOV-SPRING 2001 timeframe, that would be another hint of further weakness and the TRADING RANGE may just continue or that the selling could intensify.
Some may recall, that back in 1998 I mentioned that within 5 years I felt that a BEAR MARKET would start, which would put it to 2003, based on cycles. Im not saying that the the bear market has already started, since I believe we are still in a trading range. However is it wise to ignore that a bear market could start soon, and may have already.
Here are the percentages that the major indices are down, as of FRI's close, from their ALL-TIME highs made this year:
DOW - DOWN 9.4%, highs made 1/13
SPX - DOWN 7.5% highs made 3/24
NAZ - DOWN 28%, highs made 3/10
NDX - DOWN 26%, highs made 3/24
Its been almost 9 months for the DOW and 7 months for the SPX/NDX/NAZ since their ALL-TIME HIGHs have been set, and they have still not fully recovered and still a distance away. Since 1995, this is the longest period of time it is taking the DOW/SPX/NAZ to recover. Back in 1997 it took the DOW 6-7 months, and the SPX/NAZ 4-5 months to fully recover and set NEW HIGHs.
Again, Im not saying that the DOW/SPX/NAZ cannot fully recover, just that since this runup from 1995, this is the longest it is taking. So is this a sign of THE TOP or that THE TOP is NEARING. Frankly I dont care since Im a short-term swing trader, and I really dont know. But just from a common sense position, and this is directed mainly towards the LONGER-TERM BUY and HOLD investors. Is this really the best time with the least risks of going LONG on LONG-TERM positons. And of course it depends on how LONG-TERM one is. If one is a 10-15-20 YEAR LONG-TERM HOLDER, I say go for it. There are plenty of good stocks that have been beaten up badly. Just pick the right stock. For the SHORTER - LONG-TERM HOLDER(say 1-5 years), Im not sure it is the best time to be overly OPTIMISTIC. There are stocks that one can be optimistic about but for the overall market, I just dont think this is the best time to be overly optimistic to the point where one starts to MARGIN their account.
Again, Im not saying that the overall market cannot set NEW HIGHS from here, nor am I saying that the BEAR MARKET has started. Im just saying that depending on ones TIME HORIZON and RISK TOLERANCE, there has been BETTER periods to get VERY OPTIMISTIC about the MARKET(What I mean by VERY OPTIMISTIC is fully vested long with MARGIN). |
