Analysis - Wednesday, January 3, 2001 8 p.m.
Well, what a difference a day makes! As you know, we have
been looking for a market low near January 2, plus or minus 1
day. This was because of the forecast from the Cycles and our
Bradley Indicator both calling for a low in this same time
frame. We also stated that the failure of the 3-Day Chart on
the Dow to turn down last Friday suggested the decline early
this week would probably not last more than two days. Both
the Dow and the Nasdaq reached their lows for the most
recent correction today.
Of course we could not have known about the Fed news, but it
is always fascinating to us how often important news like
this will come out near the same time frames that the Cycles
and/or the Bradley Indicator call for important highs or
lows. Long-term subscribers know that this happens far too
often to be mere coincidence.
Today's action gave a few significant signals in the Dow.
First of all our Gann Monthly Chart turned back up today.
This is one of the strongest, and most important of all the
Gann Chart we follow, and we follow 20 different Gann Charts.
Only the Gann Quarterly Chart, which normally gives signals
just two to three times per year, and the Yearly Chart, which
has not given a new sell signal since its last buy signal in 1982,
are stronger than the Monthly Chart. Now, an upturn in the Monthly
Chart is not in itself a buy signal, although it does normally
mean higher prices are coming. For the Monthly Chart to give
an actual buy signal the Dow must exceed 11153 intraday. If
that signal is given it will be the first true buy signal in
this chart since the January 14, 2000 all-time intraday high
at 11909.
The even more important Gann Quarterly Chart will turn up
if the Dow exceeds 11153 intraday anytime from here on. If
this occurs it will be bullish for the market intermediate
term. Upturns in this chart often lead to rallies lasting
many months,and sometimes years. Now if this chart turns up
it will not necessarily mean the Dow is going that much
higher the same day, or even the next few days. It will
suggest that higher prices are coming over the coming months.
The volume today was impressive, and we consider that
bullish. However the 5-Day Advancing Volume, one of our
favorite indicators, needs to rise above its Dec. 11 high and
its early November high to give a truly bullish signal. That
did not occur today. We need to see that occur to confirm
that much higher prices are coming.
The breadth at the close showed almost three times as many
issues up for the day as down. That is strongly bullish.
The 10-Day Moving Average of the Dow is close to crossing
above the 89-Day Moving Average, which is often a sign that
a new Bull-Market leg upward has begun.
The Transports have been in a strong rally since the Oct.
18 low of last year. Today the Transports closed at the
highest level since April 12 of last year. Our Gann Monthly
Chart on the Transports have given a strong buy signal.
There are a few problem areas we must address here. There
are a few indicators suggesting the market is very
overbought,and due for another brief pullback. The McClellan
Oscillator reaches overbought territory above +100 and we are
now showing one of the most overbought readings of the last
12 months. Stix is also into strong overbought territory.
Both of these indicators are showing the kind of readings
normally seen near at least short-term highs.
On the flip side, the 5-Day RSI normally exceeds 70 near
short-term market highs. Today it closed at only 66.60.
The MACD is also still on a buy signal.
Every rally in the Dow since the October 2000 lows has
peaked up near or just above 11000 intraday. We are
up into that area again now. The top of the 21-Day 3 1/2%
Exponential Trading Band today was 11057, and note: the Dow was
not able to close above that level. A close significantly
above the top of that band would be bullish, but it is not
going to be easy.
We want you to also keep in mind that the Cycles call for a
short-term high near January 4, plus or minus 1 day and then a
pullback into Monday, December 8,plus or minus 1 day. From
there a stronger rally is expected.
As we stated on our Short-Term Traders Hotline today, the
Nasdaq gave a short-term buy signal when it rose above 2361.
The Gann Weekly Chart on the Nasdaq turned up on the rise
above 2578. While that was not an actual buy signal from this
chart yet, upturns in this chart normally mean higher prices
are coming, at least short term. The Nasdaq has fallen over
54% from its highs, which is as severe as you would normally
look for during a normal Bear Market. So there is room there
for higher prices. As long as the Nasdaq holds above 2251 we
would remain bullish.
As far as the Dow is concerned, we would remain bullish here
as long as the Dow holds above today's lows. If today's lows
in the Dow and/or the Nasdaq are broken at anytime from here
on a very strong sell signal would be given.
On our Short Term Traders Hotline this afternoon we stated
that the Nasdaq gave a short-term buy signal on the rally
above 2361. We also gave instructions to stock traders and
mutual fund switchers to raise long positions back up to 60%
long.
For now we want to raise long positions for stock
traders and mutual fund switchers back up to 60% long
tomorrow and 70% long if the Dow exceeds 11063 on a print
basis. However, some degree of caution is advised since the
Cycles call for a short-term high tomorrow or Friday, and then
a pullback into Monday, December 8, plus or minus 1 day. At
this point however, we are not overly concerned about the
short term as long as today's lows are not broken. We will
probably be a little early if we do new buying tomorrow, given
the Cycles forecast. But if the Dow exceeds 11153 intraday we
would look for higher prices intermediate term, and that is
what matters most, not trying to pinpoint every short-term
high or low. As long as any pullback holds above today's
lows, we would remain bullish. |
