I wanted to add a couple of quick thoughts regarding the market direction overall. Hopefully not adding too much more confusion. Let me just start off by saying that my comments whether bullish or bearish are not geared towards all tech stocks in general. The action over the past two months with stocks like AAPL and INTC getting creamed should offer no doubts that this is a stock pickers market. Before I throw my two cents in I think it is only fair that I briefly touch on how I derived at my analysis. My approach like many on this thread is technical in nature. I have spent the bulk of my time trying to better understand how viewing prices in a multi-time frame (daily, weekly.,etc) creates a better understanding for price direction overall. Simply put - bullish daily prices (over a sustained period) creates bullish weekly prices, which of course creates bullish monthly prices, and so on. Unfortunately, establishing direction by itself is often not enough. Especially in times like these when both the short and intermediate term trends in many stocks have already been broken. What remains is only the very longest term trends, which are easily forgotten when seeing one day swings of 3-4 hundred points in the avgs. Establishing trend by itself is fine, however, your sense of direction can remain murky which is why I believe you have to analyze the overall pattern on the charts (within that trend) just for simple confirmation that the trend "may" continue. This of course brings me to my first point.
When looking at the chart for the NAZ and listening to the many posts on both sides of the fence, you hear reference to double tops or even possible double bottoms being formed. Could be true? But what I think is important to remember that even with all this recent weakness in this INDEX the longest term trend still remains BULLISH. That's correct. Back in 1998 the NAZ broke out of an already established uptrend with prices rises at an even faster pace. That multi-year trend is still intact. The key point in all this is that the bottom of that trendline is roughly 3026 - or that double bottom on the chart. A significant break of that level would imply a break of a three year trend. LONG TERM support beyond that level carries us back to our previous uptrend back when the market took off in 95. That support level is roughly 2000 for the COMPX. What's most distressing about being this close to breaking that long term trend is currently we have incredible bearish patterns for many of the key players. Look at the charts for companies like AOL, RNWK, and CMGI. You will find head and shoulder patterns of a massive size. Besides INTC and APPL these stocks have also started to break down. Now lets take a look at some of the stocks that have held up well over the same peiord. PMCS and BRCM are two that come to mind. Both are considered key players by WS. Take a look at their weekly charts - H&S patterns. This is what I feel is important about my second component to MDA. If we are sitting so close to breaking this long term support you would love to see (if you're bullish) charts with bullish patterns overall. Something we're not seeing right now. The DOW is another example. Unlike the NAZ, the DOW has been on the SAME steady climb from 1995. A break of that long term trend would be a significant break of the lows set just LAST WEEK! We are right there. Once again look at the overall formation of the chart - a huge "diamond" pattern. These are reasons why I believe caution is warranted despite the fact that the overall trends are still intact.
Prices at the end of the last week rallied hard. Based off of the way things closed on Friday, we should hit a higher high on a WEEKLY basis (probably early in the week). The key will be how prices close on Friday. Especially in stocks like PMCS and BRCM which could be huge shorts depending on how they close. Significant weakness to finish off the week may imply a possible retest much sooner than later. Beyond this, pay close attention to the established lows already seen. These are key areas. If this weakness continues for the month of November and we retest these lows pay close attention to where things close. If things hold we may in the case of the DOW set our selves up for a possible bullish break of a bearish pattern. Remember, long term trends for the DOW and NAZ are still bullish and some stocks like QCOM are still pointing higher. Besides others setting new 52 wk. highs (CIEN, HAND).
Good Trading
SO
One other point to watch in the case of BRCM and PMCS. Watch for any analyst upgrades with lofty price targets short term. This is how WS spins its web. Remember QCOM to $1000. RNWK also upgraded just before collapse. Trust nothing. |
