Wednesday, November 08, 2000 - 07:28 pm: Edit
NOV 8 INDEX UPDATE(part II)
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Forgot to mention the SOX. It could be argued that the SOX was either forming a BEAR FLAG or a SYMMETRICAL TRIANGLE. Both formations shared the same LOWER TRENDLINE(connect the lows of 10/18, 10/26, 10/30, 11/3). That LOWER TRENDLINE, whether FLAG or TRIANGLE, was clearly broken to the downside yesterday.
I don't put alot of emphasis on the MEASUREMENT of the break of the TRIANGLE, but will mention it for reference. I have the MEASURMENT of the POLE at approximately 200 points and the break of the TRIANGLE around 745, which is hinting of a DOWNSIDE TARGET in the SOX around 550.
If the SOX does get to the 550 region, and Im not saying it WILL, that would create a NEW LOW in the NAZ below 3026.
Although there are plenty of negative developments in the NAZ/NDX, I believe that another POSITIVE DIVERGENCE is developing in the NAZ NEW LOWS. Take a look the WEEKLY CHART at the following URL:
stockcharts.com
In MID-APRIL, the NAZ NEW LOWs got to 600 while the price was around 3225. In MID-OCT, the NEW LOWS got to around 500, but the price was comparitively lower at 3026. If the NAZ sets a NEW LOW under 3026 and the NEW HIGHs does not get to the 500 range, I would consider that a strong BUY-SIGNAL in the NAZ/NDX.
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Wednesday, November 08, 2000 - 05:33 pm: Edit
OCT 8 INDEX UPDATE
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Short-term technical readings:
DOW - upper midrange
SPX - borderline oversold
OEX - borderline oversold
NAZ - borderline oversold
NDX - borderline oversold
VIX - 28.31, borderline overbought(inverse to market)
CBOE PUT:CALL RATIO - .68
As mentioned previously, the BEARISH WEDGES in the NAZ/NDX/SPX/OEX all broke to the downside. Now the question is how much lower will the market go.
The DOW is only in the upper midrange so there is more potential downside than potential upside.
The SPX/OEX/NAZ/NDX are just entering the oversold region. From those position and if they continue down, I would get a CLASS 1 BUY SIGNAL in 1-2 days.
For the very short-term(1-3 days), I am suspecting a 1-2 day bounce in the NAZ/NDX that could start THU or FRI. Since the beginning of SEPT there have been eight 1-2 day rallies in the NDX which failed. Also since mid-OCT there have been two 3 day rallies which have led to retests of the 3000 support line.
Further down the road, another NEGATIVE FORMATION in the NDX is developing - its a DESCENDING TRIANGLE. For the UPPER TRENDLINE of this DESCENDING TRIANGLE connect the PEAKs of 9/20, 9/25, 10/22, 10/23, 11/6. The LOWER HORIZONTAL TRENDLINE of this DESCENDING TRIANGLE is at 3000.
DESCENDING TRIANGLEs normally break to the downside. Since the NDX closed only 60 points above the 3000 support line, a test of that line could occur as early as tomorrow. Although I am suspecting that a 1-2 day bounce tomorrow/FRIDAY, we should not ignore the possibility of significantly breaking the the 3000 support line tomorrow.
Although this DESCENDING TRIANGLE in the NDX is a significant negative development, I am also noticing a POSITIVE development. The MACD on the NDX is forming a POSITIVE DIVERGENCE. Per the following chart, since MID-OCT, the MACD is developing HIGHER LOWs, while the NDX is retesting the 3000 region:
stockcharts.com[H,A]DECAYNMY[DB][PD20,2!A3000][IUA8,21,9]
So how do we interpret the contrarian factors in the NDX of the DESCENDING TRIANGLE and the POSTITIVE DIVERGENCE in the MACD? One possibility is one of these contrarian issues could over-ride the other. Another possibility is that the DESCENDING TRIANGLE will break the support at 3000, and if the the MACD maintains the POSITIVE DIVERGENCE, that break of 3000 should be an important bottom. If the NDX breaks 3000 significantly and the MACD maintains a POSITIVE DIVERGENCE(along with other technical issues), I would then go long more substantially than what I have been doing recently. I may go long 40-60% of our funds, if such was to occur.
Another important negative is that the VIX is only around 28, while the recent peak was around 37 which implies that the VIX is still significantly away from extreme levels. This reading in the VIX is lining up with the DESCENDING TRIANGLE in the NDX, in that the DESCENDING TRIANGLE implies a possible significant break below 3000.
For both my personal and our WEBSITE MUTUAL FUND ACCOUNT, we closed the recent USPIX(short-NDX) position for a quick 12% profit, and now are even(no bias) with about 85% cash. If the NDX rallies strongly tomorrow, I will consider it as a 1-2 day rally and will add another small short-position. Im keeping our plays small/conservative, since this market is really tough to play and I get depressed if I get WHIPSAWED badly. gggggggg Then I have to eat about 100 dumplings to get me out of my depression. gggggg |
