I thought some of you would find this e-mail I sent out last night of interest. Enjoy!
David K's Interpretation of Moneytalk, Educational Links, Financial Information and Special Alerts
SPECIAL ALERT! - April 4, 2001 8:30 p.m.
Editorial Comment (EC): Hello folks! Very important Special Alert here. Super Duper Special Alert. Super Doplar Radar Special Alert. Super Diaper Doplar...you get the point.
I received many requests to continue the market internal analysis. I just finished crunching today's Nasdaq Composite numbers and for the first time since January 2, 2001, there are positive divergences in EVERY
CATEGORY?
Did you hear that Vern? POSITIVE DIVERGENCES IN EVERY CATEGORY!
Now, the last time I sent out an e-mail examining the market internals, you may recall that in two categories, there were no positive divergences -- those were the advancing volume and the declining volume, both which indicated a bearish signal. Today, all categories evidence positive divergences. Let's look at the analysis and the numbers first and then analyze the results.
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ATTEMPTING TO IDENTIFY A NASDAQ NEAR TERM BOTTOM!
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First thing I did as I was analyzing the Nasdaq data, was compile an ongoing list of each new closing lows in the Nasdaq. I compared the market internals each time the Nasdaq closed at a new low. Here is the list:
Nasdaq Closing Lows since January 2000
April 14th - new low of year 2000 closing at 3321
May 23rd - breached April 14th low closing at 3164 (Positive Divergences Spur Rally)
Oct. 12th - breached May 24th low closing at 3074
Nov. 10th - breached Oct. 12th low closing at 3028
Nov. 13th - breached Nov. 10th low closing at 2966
Nov. 20th - breached Nov. 13th low closing at 2875
Nov. 21th - breached Nov. 20th low closing at 2871
Nov. 22nd - breached Nov. 21st low closing at 2755
Nov. 28th - breached Nov. 22nd low closing at 2734
Nov. 29th - breached Nov. 28th low closing at 2706
Nov. 30th - breached Nov. 29th low closing at 2597
Dec. 19th - breached Nov. 30th low closing at 2511
Dec. 20th - breached Dec. 19th low closing at 2332
Calendar Year 2001
Jan. 2nd - breached Dec. 20th low closing at 2291 (Positive Divergences Spur Rally)
Feb. 21st - breached Jan. 2nd low closing at 2268
Feb. 22nd - breached Feb. 21st low closing at 2244
Feb. 27th - breached Feb 22nd low closing at 2207
Feb. 28th- breached Feb 27th low closing at 2151
March 2nd - breached Feb. 28th low closing at 2117
March 9th - breahed March 2nd low closing at 2052
March 12th - breahed March 9nd low closing at 1923
March 16th - breached March 12th low closing at 1890
March 20th - breached March 12th low closing at 1857
March 21st - breached March 20th low closing at 1830
March 29th - breached March 21st low closing at 1820.
April 2nd - breached March 29th low closing at 1782
April 3rd - breached April 2nd low closing at 1673
April 4th - breached April 3rd low closing at 1638 (Positive Divergences Across the Board - Will it spur a rally?)
Ok, I am now going to go through all of the market internals which demonstrate positive divergences between the Nasdaq close today (April 4th) versus the prior Nasdaq closing low which occurred on April 3rd. Let's crunch the numbers:
1. Price
On April 3, 2001, the Nasdaq (or OTC - Over the Counter) closes at a new low for the year of 1673. Today, April 4, 2001, the Nasdaq closed at 1638. A new closing low in the Nasdaq gets us past the first hurdle.
2. Volume
On April 3, 2001, there were approximately 2.511 million shares traded on the Nasdaq . Today, the volume on the Nasdaq was approximately 2.416 million shares. Therefore, we have a new closing low in the Nasdaq on lower volume. The second hurdle is complete. A lower close with lower volume is a positive indicator since it indicates there wasn't as much selling volume even though the composite closed lower.
3. Advancing Issues
On April 3, 2001, there were 800 Advancing Issues. For those of you new to technical analysis, "advancing issues" are simply stocks that rose in price on that day. Today, there were 1,493 Advancing Issues. That is a huge increase in percentage of advancing issues when the Nasdaq closed lower than the prior day. Bullish Indicator!
4. Declining Issues
On April 3, 2001, there were 3,013 Declining Issues. Today, there were only 2,239 Declining Issues. Less decliners is also a Bullish Indicator!
5. New Highs
On April 3, 2001, there were 17 new highs. Today, there were 21 new highs. More new highs is better. Bullish Indicator!
6. New Lows
On April 3, 2001, there were 569 new lows. Today, there were only 485 new lows. Less lows is good. And that is a significant decrease in the number of new lows. Bullish Indicator!
7. Advancing Volume
On April 3, 2001, the advancing volume in the Nasdaq was 165,345. Today, the advancing volume was 686,516.
Woah Nellie! That's a HUGE increase in advancing volume. This evidences a lot more buying volume than selling volume even on a day when the Nasdaq closed lower than the previous close. Bullish Indicator!
8. Declining Volume
On April 3, 2001, there were 2,316,055 declining shares. I was hoping there would be more less declining shares indicating less selling pressure today, and there was! Today, there were 1,682,176 declining shares. Bullish Indicator!
Conclusion. Ok, now the analysis. Beware of market internals. They looked good the last time I analyzed them, but categories #7 and #8 were bearish last time. This is the only time I have seen positive divergences across-the-board with the exception of January 2nd and May 23rd - both of which sparked rallies in the Nasdaq.
Point #1: Does the fact that positive divergences exist across the board this time mean that the Nasdaq hit a near term low on a closing basis today and a near term rally is set to begin? Certainly not. Tomorrow's market action could be dictated by exogenous events such as war, alien invasions, companies declaring bankruptcy, political instability, yada yada yada, I want a new Miata.
Point #2: Like I said, this is simply my Interpretation of the data, so you can make of it what you will. This is interesting stuff and if this does signal an interim bottom, I will retain my faith in market internal analysis. If it doesn't. Well, then its back to the drawing board. I plan on speculating a little tomorrow in the Nasdaq in the hopes that I can catch a rally from this point going forward. I will let you know if it is successful or not. Actually, you will know by watching the Nasdaq whether it is working, so you can live vicariously through me if you'd like!
Point #3: Please do not take any of this as a recommendation of any sorts. In fact, I encourage you to ignore everything I say and do your own research. I am just sharing with you my analysis and thought process.
Final Thoughts from David K: I just checked the Nasdaq futures and they are currently up. However, you know as well as I that the futures are a completely unreliable indicator as to how the market will perform tomorrow. Still, its nice to see them up for a change! Here is the link:
cme.com
- David
Want to learn more about my e-mail service?: Just click on the following link:
davidk555@earthlink.net
DISCLAIMER: The information contained in this Special Alert is not intended to constitute financial advice and is not a recommendation or solicitation to buy, sell or hold any security. This article is strictly informational and educational and is not to be construed as any kind of financial advice, investment advice or legal advice. Copyright David Korn, L.L.C. 2001 |
