"Cherney on the Markets"--S&P: "NASDAQ Capitulation Should Come Wednesday"
>>> Tuesday October 03, 2000 (4:36 pm ET)
NASDAQ Capitulation Should Come Wednesday
By Paul Cherney, S&P Market Analyst
NEW YORK, Oct. 03 (Standard & Poor's) - If you think this comment looks similar to yesterday's comment, you are correct, but there are differences.
What this market needs to do is close at or near the lows of the session (which is what the NASDAQ did again on Tuesday). BUT NOW, we need to see a lower opening which sponsors even more selling.
Ideally I'd like to see a gap lower at the open, then even more selling and even lower prices to trigger sell-stops to shake the stock from the weak hands. In the process it would be good to see big volume both on the way down in prices (showing that non-believers in the upside are giving up and selling into a declining market), but then, even more important, even bigger volume as prices rebound from intraday lows, that would suggest that the money on the sidelines has thrown caution to the wind and is running into the market with buy tickets in hand.
I also think we will need the capitulation day to generate 2 billion-plus shares on the NASDAQ.
As of 3:30 pm EDT, The CBOE's Equity Only P/C Ratio was 0.59 (just okay). The Total P/C ratio was 0.66 (so-so). Intraday on Wednesday (if we are really going to see a capitulation). Intraday on Wednesday, I would want to see a Total P/C ratio print over 0.9, preferably over 1.0 and an Equity Only P/C ratio greater than 0.70.
One model I run is projecting downside risk for NASDAQ prints 3520.40-3239.42 (we've already fulfilled a move below 3520). In reviewing charts to try to get a handle on where this sell-off might stop, prints in the 3200's cannot be ruled out for Wednesday's market. On 5/30/2000, the NASDAQ gapped higher at the open to print 3286.54. The previous day's high print was 3256.63, so the 3256.63-3286.54 area represents a price gap. It is interesting to note that the low end of the model I am relying on most heavily right now is suggesting risk for NASDAQ prints 3239.42, which is just below the price gap. (There is no rule that says price gaps have to be filled.)
The S&P 500 has risk for a close 1398. The index has immediate resistance in the 1432-1440 area, then 1449-1461. Immediate support is 1419-1414<<< |
