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A bit of a confusing view as we are still on the over sold side of things and Heinz was looking for a low around the 6th and a top later around the 17th. On the other hand, Allan's Allias who has been nailing the E-wave reads pretty well for the last month or so is looking for a high on Monday and then the beginning of a 5th wave down. I will have to talk to him later but I am fairly sure he isn't looking for THE 5th wave, just the 5th wave of this minor count of the pullback.
That said, while the indexes aren't much help in deciphering a lot of this, there are some bearish themes that seem to be scattered around urging caution. The upmoves of the last couple days has been on very weak volume and has decreased each day. There are potential signs this could be the start of the big 5th wave which is most evident by looking at certain stocks in the 3 line charts such as NTAP and JNPR. Some stocks are hard to get a clean count on but these seem pretty obvious and I am sure there are others. Also in regards to the 3 line charts are the multitude of stocks that are a hair away from painting a red down stick as this week's lows were fractions from fulfilling the requirements to start painting down waves instead of up upwaves.
One problem I have is the way it seems that despite the commercials being mainly short, the attempts to make the indexes look good. I saw a lot of games being played last week as the most heavily weighted stocks were propped up. The swing in MMM on Friday was hilarious. It dropped like a rock on high volume about 2 1/2 points and was melting through support when the reversal came in the indexes and MMM proceeded to gain 4 points in a short period of time. I am sure it had nothing to do with it being the heaviest weighted stock in the DOW. -ggggg-
This next week should be interesting and very volatile as it is the week before triple witching. The futures traders will be unwinding positions and rolling them out to the next quarter. I would expect to see wild swings down and up as the rolling out occurs and the COT report two weeks from now should be interesting to see if they renew their heavy short positions or if they use this triple witch to get more neutral.
MU support held for now and many stocks held their trading ranges although a few did not. While the weekly candles look better with Friday's rally, it wasn't enough to paint a glimmer of bullishness in the sticks. The Tech issues are down following last week's grave stone doji and the non tech painted the second red candle since bouncing off the upper fork tine resistance. While it is still early in this move, I am already seeing some signs of a return to flight to safety. Bonds and notes made a bounce, the XAU has a buy signal, EK, GM, MO, and BA are showing strength again as are many of the cyclicals. While common sense, the MZM supply and some commodities like lumber are showing signs of inflation, the CRB index overall has been really taking it in the shorts showing that inflation isn't a sure thing yet. The dollar is showing over bought as foreign nations flee to the buck since we are more stable than most areas around the globe. Still I expect it to top out here in the next few weeks and start a new descent.
I have no idea how important Nepal is to our trade but the crown prince mowed down the entire royal family last night with a machine gun. We have escalating violence in the Middle East, Africa is a basket case as usual, Korea is still broiling under the surface, Indonesia is in chaos, etc. Don talked a long time ago about us being overdue for a major skirmish and economic unrest according to statistical history and K-wave theory. Who knows when this will all boil over but my function last night for my squadron was interesting. Our speakers were members of our squadron in WW II and then Korea and then Vietnam. Some of the parallels really opened my eyes. The US wasn't really ready to fight in most of these cases and everyone thought we could escape getting involved or else it was none of our business. Military readiness had been declining prior to our involvement ( almost like the Clinton years).
I am not saying the end of the world is coming or that the markets will crash for sure but the denial here is alarming. The number of families on the brink of going bankrupt is up to over 30 million according to the article I posted last night, there is political unrest in many regions and it is on a larger scale than usual. Our market as gauged by the NASDAQ just went through a drop worse than the initial phase of the 29 crash yet everyone is rushing to jump right back in despite no signs of a fundamental turn around. In fact yesterday's NAPM report showed the economy getting worse, not better. Reading around SI I still see the classic arguments about how the shorts are to blame for stocks decline and when valuations being in the stratosphere are brought up as possible real causes, the defense is always, " but the stock is already down so far, it is a bargain." Note this line is being repeated on stocks with PE ratios of anywhere from 30 to 200 when earnings growth, cash flow and any other measure you want to try to apply is negative.
The DOW and NYSE are near strong resistance, the NDX and NASDAQ last week formed a gravestone Doji and this week was down giving added weight to the formation, valuations are as bad or worse than they were at the March top in many stocks and tech biased indexes. PEs are lower in teh non tech sectors but is still generally 3 to 5 times the long term growth rates of these mature companies. Debt in the telecom sector and surviving ISPs is higher than ever. Last weekend I saw on CNN's Moneyline that telecom debt was 199 bil in 1998 and 99 yet in 2000 it was up to 256 bil. In the last few weeks there have been secondary offerings going out on many stocks watering down earnings per share in a decelerating economy yet no ones seems to mind and keeps bidding the stuff up anyway.
Last of all, the charts show a pretty clear E-wave read at least as far as tech goes. From March 2000 to May 2000 was wave 1 down, then from May to September 2000 was wave 2 up, September to April 01 was wave 3 down, and April to possibly now or at least in the near future will be the wave 4 up which means we have a wave 5 down coming. Wave 5s are known for being fast and furious and crash like if not crashes in themselves. In the 3 phases of a bear market, we had a 1st phase where denial was evident, then we finally had a phase 2 where everyone finally admitted we were in a bear but we never saw real capitulation. The last phase or phase 3 is the capitulation phase yet everyone is trying to scalp off that last 1/8th of a point before the drop. Is this really the smart way to play this?
I saw people this week claiming huge gains or high percentage win ratios from buys in the last two weeks yet every post I followed up on was down from where they claimed they bought it. PG, DD, GE, WCOM, QQQ, JNPR, JDSU, CSCO, SUNW you name it, from where they bought it, it only moved a point or two higher then collapsed. The only exceptions I saw were IBM and MSFT which have been flat. I am not saying it is the threads on which I post but all over the net. Beware of what people claim on the threads around the web.
Anyway, with all that said, let's go buy the dip!!! -ggggggggggg-
Good Luck,
Lee
EDIT - One concern I have is the wave 2 from May 2000 to September was a double pumper in that it went up, fell then ran up a second time before finally caving in. With the time lines lining up from an April low this year, we could repeat the trading range until this fall and not get a wave 5 decline until this winter. |
