<font color=blue>2001 July 13 Market Analysis
THIS COMING WEEK SHOULD SEE THE LAUNCH OF OUR NEW WEB SITE
At that time, we will be distributing this free market commentary
column via email from our own server twice per week.
FREE CHART GALLERY
During the week, numerous charts are posted daily to during our real
time program, Done in 90 Minutes. After 11AM Eastern time, we lift
the passwords from both the real time chat and the directory
containing charts. The URL for the Index of Charts for the month
July is ottographs.com
Once you get there, all you need to do is to click the folder of the
date and all of the charts posted will be displayed. Please note
that folders with "MB" remain password protected.
FREE REAL TIME CHAT
If you are interested in participating in our real time chat, please
see ottographs.com
DONE IN 90 MINUTES, WITH TERESA LO
Next week, I will be beta testing a method of sharing my desktop. If
it works according to plan, we will introduce the use of NetMeeting
to enable all participants of Done in 90 Minutes to view my charts
live on their own computers.
Please note that online registration for next week continues up to
9PM Eastern each Sunday. For more information, please see
ottographs.com
TRADER WORKSHOP WITH MIKE BRUNS
Once again, the workshop was a success. If you are interested in
joining Mike this coming Thursday, full details for the Traders
Workshop is at ottographs.com
TRENDVUE.COM MARKET ANALYSIS
Title: Technical Analysis of the NASDAQ 100 Index
Over the past month, we have been watching a test of the April lows
on the weekly charts for all of the indices and most of the top
trading stocks.
ottographs.com
On the daily chart, numerous patterns had been attributed to this
consolidation zone by various technicians.
ottographs.com
To me, so long as the ADX was not rising, the entire area was
basically a giant consolidation zone within a big downtrend. In the
end, it boiled down to the test of the June low that we discussed in
last week's column.
ottographs.com
In our real time program, Done in 90 Minutes, we have been
targeting a test of the low from the week of April 20 in the 1600
area as "the last stand" for three reasons. First, it is the lower
edge of the boundary of the giant consolidation pattern. Second,
using Japanese Candlestick theory, the lows of tall white bars are
areas of support. Third, it was a textbook test of bottom on the
daily chart.
In our pre-open commentary for Wednesday, July 11 we said that in
order for a successful test of bottom, we would need to see the
NASDAQ 100 index trade above Tuesday's high of 1719 on thrust to
prove that the low was rejected. At the time, I said something to
the effect of "how we'll get there, I don't know, but stranger things
have happened. Traders need to prepare for all scenarios." Right
after the market closed, a miracle in the form of Microsoft appeared
out of the blue. It was another case of the old Arthur C. Clarke
quote: "Not only is the universe stranger than you imagine, it's
stranger than you can imagine."
What is a trader to do at this juncture? In terms of corporate
fundamentals, the bottom line for Microsoft does not change the
outlook for most of the other popular NASDAQ stocks whatsoever. The
only thing that has changed at this point is something entirely
psychological. Going into the close on Wednesday, many traders and
the financial media seemed dejected due to another round of lowered
earnings guidance, pushing any hope of recovery into next year.
Traders and investors have been repeated been disappointed as to the
timing of the turnaround, and these pre-announcements over the course
of the last week caused a collective evaporation of the last vestiges
of hope. This kind of sentiment is tantamount to a "give up" phase.
The news from Microsoft acted like a pair of defibrillator paddles on
a cardiac arrhythmia case. For now, the flat-lined patient has been
revived in the ER but what happens going forward is far from
certain. I believe many traders will attempt to fade this move up,
but the question is whether they will become trapped. It's been a
long, long downtrend, and the set up here was a test of low on both
the daily and weekly charts. Given the success of shorting over the
past year, many players will believe that this is some sort of "sharp
short-covering rally" and use it to initiate additional short
positions. However, the danger here is that this bottom might be for
real, and if the NDX survives the first scary pullback after this pop
here, it could set up quite the flurry of short-covering, the likes
of which we have not seen in a long, long time.
ottographs.com
Looking at the daily chart, we can project some targets. Typically,
on this 2"B" test of low, we would consider the 20-day EMA overhead
the first target, and it was reached today. We know that many
traders will have drawn a "downtrend" line here, highlighted in
green. This projects a target right at the 50-day moving average in
the 1828 area. The third target to the upside is the top of the
pattern, just under the January 2001 low of 2100.
Have a great weekend.
Teresa |
