DEC 30 INDEX UPDATE
------------------------------
Short-term technical indicators:
DOW - Pending CLASS 1 SELL signal/overbought region
SPX - overbought region
OEX - upper midrange
NAZ - upper midrange
NDX - upper midrange
VIX - 30.32, oversold region(inverse to market)
CBOE PUT:CALL RATIO - .67
5-DAY TRIN - 5.08
Per my short-term technicals the overall market was in the overbought region on THUR and possibly started a reversal to the downside.
As negative as the market appeared especially the NAZ/NDX, I am starting to notice some positives developing. These are mid/longer-term positives, since I do believe that for the shorter term there should be some sort of a retest, whether that retest produces a HIGHER LOW or LOWER LOW or a precise DOUBLE BOTTOM:
1) The NYSE NEW HIGHs reached 319. For a very long time the NYSE NEW HIGHs could not break above 200. Prior to the selloff in 1998 they were consistently trading in the 200-400 region with spikes above 500, which was also during the bull run. During the EXTREME SECTOR ROTATION period which started in the spring of 1999, I was turning bearish since the NYSE NEW HIGHs were dropping and mentioned at that time that I would remain bearish until the NYSE NEW HIGHs were back in the 200-400 range consistently, not just short-term spikes. If the NYSE NEW HIGHs can stay above 200 for about a month I will start to become bullish on the NYSE to the extent that maybe a main bottom has been set. As bullish as this sounds, I cannot ignore the possibility that the NYSE NEW HIGHs have gotten this high simply due to rotation out of the NAZ/NDX, and could just be an anomoly, which implies that the NYSE NEW HIGHs could drop if funds start rotating back into the NAZ. I am fully aware of the DOW DIAMOND and the many predictions that the DOW will drop to the 7000-8000 region or lower, but for not the market internals are not supporting those bearish prediction. Again that could change if this it was caused by sector rotation.
2) For the DOW theorists, the Transports did set a HIGHER HIGH. One part of the DOW THEORY is that the TRANSPORTs leads the DOW.
3) The RUSSEL 2000(RUT-smallcaps) produced a HIGHER HIGH. There is a downward trendline now around 495, so I would consider a break above that line as another significant bullish signal.
The following is not statistically viable since it is only a one-to-one comparision, but should be mentioned. After the selloff of OCT 1998 which ended in early OCT, the RUT started rising at a faster pace in OCT 1998 than the NAZ/NDX, which implies that the RUT actually led the NAZ/NDX up from the OCT 1998 bottom. Is it possible that it is happening again. Im not saying that the NAZ/NDX is going to set NEW HIGHs, just that an important/mid-term bottom has been set.
4) The VLE(VALUE-LINE INDEX) also produced a HIGHER HIGH
5) The NYSE also produced a HIGHER HIGH
6) Recently, the NAZ/NDX produced LOWER LOWs; however the SOX did not produce a LOWER LOW in the same time frame. For several months I have been a believer that the SOX has been leading the NAZ/NDX in both directions; therefore I am considering it as a positive that the SOX did not set a LOWER LOW in the same time frame.
7) The market internals for the NAZ have improved. And even in light of FRIDAY's strong selloff in the NAZ/NDX, there were still more ADVANCERS to DECLINERS(2106:2041). The NAZ NEW HIGHs/LOWs have recently been improving also since the previous trough.
There are quite a few positives for the overall market. The main negative for the market is the US DOLLAR. Although some will argue that it will help our exports, I feel that the bigger issue is if the US DOLLAR drops how much of the FOREIGN MONIEs will exit the US MARKETs.
Right now our WEBSITE MUTUAL FUND account and my own are long with no short hedge. I have also been dipping into a couple of small caps. |
