OCT 11 INDEX UPDATE
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Short-term technical readings:
DOW - CLASS 2 BUY signal
SPX - borderline CLASS 1 BUY
OEX - borderline CLASS 1 BUY
NAZ - borderline CLASS 1 BUY
NDX - borderline CLASS 1 BUY
VIX - 27.44, CLASS 2 SELL(inverse to market)
CBOE PUT:CALL RATIO - .82
My short-term technicals for the overall market is now in the CLASS BUY territory, and with any negativity tomorrow, I will be getting firm CLASS 1 BUY SIGNALs. So some sort of a short-term bottom should occur tomorrow/Friday. The CBOE PUT:CALL ratio is now clearly in the BULLISH /BUY territory and the VIX is also near a short-term HIGH per my system, which are lining up with the CLASS BUY signals in the indices.
My WEEKLY TECHNICALS are now CLASS 1 BUYs for the DOW/SPX/OEX/NAZ/NDX.
The question is how strong will this rally be. In light of all the negative TECHNICAL developments, I feel that the rally should be small and at most a 38% FIBONACCI rebound. Assuming that that the NDX does not selloff alot more, the 38% FIB rebound would be around 3500. Again Im not saying that it will get that high just that I feel that would be the maximum upside for the forthcoming SHORT-TERM rally.
Here are the next support lines for the NAZ/NDX.
NAZ - 3250(horizontal support), 3043(MAY lows)
NDX - 3110(horizontal support), 2897(MAY lows)
I do expect negativity tomorrow and it could be quite strong, but a bounce/short-term rally could start as early as tomorrow.
Many, and possibly most, are denying that a bear market is possible on the premise that the economy is doing well, and the economy is doing well. Right now I believe the P/E RATIO for the S&P is around 27, but the historical normal average is around 15-17. Instead of looking at it as a bear market, is it possible that the overall market is just returning to normal historical levels. Keep in mind that in the 1970's(may have been late 60's) the P/E got as low as 6, during the recession at that time. So the recession produced levels below the historical norms.
The market has been convinced that the new P/E norm for the S&P should be much higher than the historical norm of 15-17 due to the NEW ECONOMY. Interesting to note that many analysts are not using the term NEW ECONOMY as much as they did in the recent past. So again I ask, is it possible that the market is simply returning to historical norms of normal healthy markets? Keeping in mind that during the recession periods it did get as low as 6. I realise that many BULLs may feel that it is out of the question that the S&P is simply returning closer to historical levels for normal healthy markets. Maybe the new economy can justify increasing the norm of 15-17 up slightly(a few percentage points not 50%-100% which many analysts made so many believe).
If the market does continue to drop and the P/E does get closer to historical norms - LETS NOT FORGET how often the TERM "NEW ECONOMY" was use to justify the BULL RUN. A few hundreds times a day only ggggggggg
And lets not forget those analysts who pushed it hard. Cant let them get away that easy in case this market gets more bearish. |
