Agree. We are approaching teh top of my top fork on the DOW but my weekly charts aren't showing a major top yet signal wise. My dailies though are saying get out and play safe. Barring rotation though, the techs have a couple bullish formations. There are numerous bull flags and inverted H&S in most techs and tech indexes. Rotation from DOW to tech or formation failure?
Our indicator also seems to be hinting at a drop coming soon but there is a question as to if the DOW indicator gave amid term trend reversal signal. The other indicators for the other indexes however are also signalling caution.
My first impression especially after talking to Don is the NDX and NASDAQ fill the gap around 1670 then shoot up to fulfill the 2200 NDX target and C wave in this counter trend bear rally. After that, we tank and at least retest if not go lower to the original 1063 target area.
For the DOW? Heck if I know.
Here is more of what I wrote on our site.......
On the markets, I see potentail for upside like I said in the NDX and NASDAQ once they fill the gap around 1670 but it is a very very dangerous time with the upsdie potentially 2200 or so on the NDX but the downside is down to who knows where. The upside is based more on time than set ups and the only bullish sign I see is the bull flags and inverted Head and shoulders in the indexes and so many stocks in it.
The DOW, SPX, OEX and NYSE however are being littered with over bought signals and/or sell signals in the dailies although the weeklies show more room. My charts only go out so far so now with the passage of time, I am seeing that I too have a turn coming in May but while Heinz is for 2 May, mine appears to be more around the 10th. I looked ahead to teh week of the 10th and we have PPI, Import export and a few other key economic reports coming that week. To support Heinz' turn, next week is NAPM and employment numbers.
Earnings are about over and end of month window dressing should end by the end of next week also. Not much to look forward to other than warnings in a few weeks. Again as I said last night, I think Greenspan has over shot and though liquidity is being pumped in hard, interest rates have gone too low etc. There is still no incentive for telecoms to build out, internet sites to beef up etc. Corporations are going to hunker down and try to save money. People that bought the new paradigm are now educated via the school of hard knox and know that yes, even tech has business cycles, aren't immune to cyclic slowdowns and that tech grwoth of 20% doesn't make a stock worth a 500 PE. There are tons of Mutual Fund holders that just want to get out even and stock holders that will take whatever they can get just to get out. With all that supply over head and people nervous to hold, I don't see alot of upside in the immediate future. Even the Fed is now saying we may not turn the corner in the next couple quarters like they were hyping a few months ago. The bond market ( who are the smartest people in the economic world) are running scared and see rampant inflation ahead. Like the commercial shorters, that is one bunch you don't bet against. The Bond guys saw the recession a year before the stock casino and now they are seeing the inflation cycle coming. While inflation may or may not pump some business back up, it will reduce justified PE ratios.
I guess what I am saying is longs need to be real careful and have good stops ready. By the same token, shorts need to be careful since although cycle wise we may be nearing a turn down and there are some over bought signals in non tech, the inverted H&S and bull flags in tech show there is great risk in being short should the H&S bear fruit and result in a multi hundred point rally. The next couple weeks are going to be real tough no matter which side you are on. I wouldn't be betting too big trying to catch a top or bottom and would advise you would be better off waiting for the turn to see which way it breaks or else put on a straddle.
Since I am already short a small bit, I may put on a small long in a different security to form a synthetic hedge/straddle. I am eyeballing PG due to earnings this week but I havent decided yet.
Our indicators are pointing to increased risk of a substantial downturn if we don't reverse down right away Monday. While it doens't necessarily call a move within a day, it should prove useful enough for a large short play within a matter of weeks. Hasn't happened yet but it is looking like an early warning right now by my interpretation. If it does indeed trigger, I will post and I would not be caught long. The sell off could be quite large. What will provide the spark? Heck if I know.
Site is completely updated. Yes, I even did the 3 line charts on time this time. -gggg-
Good Luck,
Lee
marketswing.com |
