OCT 21 INDEX UPDATE
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Short-term technical readings:
DOW - overbought region
SPX - CLASS 2 SELL, INTRADAY BORDERLINE CLASS 1 SELL
OEX - CLASS 2 SELL, INTRADAY BORDERLINE CLASS 1 SELL
NAZ - CLASS 2 SELL, INTRADAY BORDERLINE CLASS 1 SELL
NDX - CLASS 2 SELL, INTRADAY BORDERLINE CLASS 1 SELL
VIX - 26.85, OVERSOLD(inverse to market)
CBOE PUT:CALL RATIO - .50
5 DAY TRIN - 4.46
Intraday, I did get borderline CLASS 1 SELL signals on the SPX/OEX/NAZ/NDX, but since they closed off their intraday highs they closed with CLASS 2 SELL signals. As I have mentioned in the past it is more reliable to get CLASS 1 SELL signals on a closing basis not intraday. Since those indices did close off their lows, that could be a hint that a short-term reversal started. However they could still head up to form a CLASS 1 SELL which could be as early as MONDAY with the window until TUE's highs.
Through out the whole day the SOX lagged the NAZ/NDX and closed slightly negative, forming a DOJI. DOJI's implies indecision and are common at reversal points.
Interesting to note that the PUT:CALL RATIO has already dropped to .50 which is already in short-term bearish territory. The VIX already dropped 10 points. The strong fear levels of a few days ago have already declined significantly, and already approaching complacency levels. Its not yet at complacent levels, but appears to be heading their quite quickly. I have not done any analysis to see how long it took the fear levels to drop after previous important bottoms, but Im getting the impression that this change in sentiment is a bit quick. On a subjective basis, one could argue that this rapid change in sentiment could be a hint that the recent high levels of fear could get higher.
CNBC mentioned today that the VIX got to extreme levels this week. On a relative basis that is correct. However, please keep in mind that the VIX got as high as 170 in 1987 and around 60 in 1998 and around 40 earlier this year. So from a perspective of absolute numbers, the VIX could get higher. Not saying for sure that it will, just that I wont ignore the possibility that it could.
Some are expecting that this rally off of an OCT BOTTOM will be similar to 1998, which produced significant NEW HIGHS in price. One large difference between OCT 1998 and OCT 2000 is the level of NEW LOWs. In SEPT/OCT 1998 the NEW LOWs got to around 1100(NYSE) & 1500(NAZ). The NEW LOWs this week only got to about 300 on the NYSE and around 500 on the NAZ. So its fair to say that this selloff was not as devestating as the one in 1998. Im not saying that it will definitely get that low, just that there still is a possibility of the NEW LOWs getting worse than this week. And if it does get worse it could get alot worse since this weeks NEW LOWS is still far away from the NEW LOW levels of 1998.
So for the mid-term(30 days) I feel that the NAZ/NDX did form a mid-term bottom, but we could still see a retest of the recent LOWER LOWs in the DOW and SPX.
In light of the recent bullish developments in the NAZ/NDX I am not expecting the forthcoming short-term selloff in the NAZ/NDX to be that strong, and should be a TRADING BUY opportunity. However if the DOW and SPX does a retest of the NEW LOWER LOWS, that could force the NAZ/NDX to do another retest - I wont ignore that possibility for the mid-term(30 days). |
