S&P's Chief T/A: "Nearing the Bottom?"
businessweek.com
Sentiment:
...Bulls vs Bears... yardeni.com
...VIX...http://stockcharts.com/def/servlet/SC.web?c=$VIX,uu[l,a]dhllnymy[pb50!b200][vc60]
...CPC...http://stockcharts.com/def/servlet/SC.web?c=$CPC,uu[h,a]dhllnymy[dd][pb21!f][vc60]
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Rearranged some.
>>> SEPTEMBER 7, 2001
TECHNICAL MARKET INSIGHT • From S&P
By Mark Arbeter
Nearing the Bottom?
The market is probably approaching a short-term low -- but it's too early to jump back in.
The market is in the process of testing the lows seen in March and April and therefore is at a critical juncture.
During the past week, momentum has accelerated to the downside, as the slope of the decline has steepened. This suggests that institutions and investors are getting more anxious about their equity holdings, especially in technology, and throwing stocks out. This increase in downside momentum is typical at an intermediate-term low.
The last couple of days has also seen wholesale dumping of all groups of stocks, not just technology. This indiscriminate selling of all stocks also occurs near or at major intermediate-term lows.
Support for the Nasdaq runs from 1620 to 1700, which was the range the index traded at during its low and turnaround on Apr. 4.
...The Nasdaq has a tendency to decline below the initial pass by up to 5% during its double bottoms.
... We would not want to see this threshold exceeded.
The S&P 500 has support in the 1081 to 1118 area, or the price range the index traded at on Mar. 22, the lowest level the "500" hit on an intraday basis during the initial low.
...A successful test for the "500", however, should be no bigger than 1%-2% below its March lows given that the index is much less volatile than the Nasdaq.
If the market is confined to the parameters set above, and turns around,
... we would then need to see a strong advance before forecasting that the worst is over.
For instance, at previous intermediate-term lows,
... the Nasdaq up/down volume ratio will see a day or two that exceeds 4:1, if not higher, and
... the 10-day ratio should move above 2:1.
... Until the markets can exhibit this kind of volume breadth thrust, a definitive low can not be called.
Currently, up/down volume measures on both the NYSE and the Nasdaq remain negative. The only positive is that on a six- and 10-day basis, the up/down volume figures are extremely oversold, hitting or nearing levels seen at the April lows. One positive market internal so far is the percentage of new 52-week lows on the Nasdaq and the NYSE. In April, Nasdaq new lows/issues traded rose to 13%, well above the current reading of 7%. NYSE new lows/issues traded hit 8% in March vs. 4.5% on Thursday. The potential for a positive divergence (lower index price, fewer new lows) is present, usually seen at market lows, and would be another ingredient to putting in a successful test of the lows.
Sentiment, while still mixed, is definitely showing signs of increased bearishness in some indicators.
... CBOE Put/Call ratios have been fairly high of late, indicating that fear is rising.
... The 30-day put/call ratio has risen to 0.78 or above the level seen in April while the 10-day P/C ratio is close to equaling the recent high of 0.89 in March.
... The volatility indexes (measure of option premiums or fear) have risen sharply the past two weeks, which of course coincides with the increase in downside momentum.
However, these indexes have not yet reached the levels seen in April.
... The VIX (OEX) got to almost 35 Friday, nearing the 40 area hit in March and April.
... The VXN (Nasdaq 100) reached 65 on Friday, up from below 50 just recently, but still below the 80 area posted in April.
... Sentiment polls are still mixed, basically because the Investors Intelligence poll remains too bullish.
........ Bulls are still outpacing bears, 44.3% to 30.9%. As we have said, this poll usually moves to at least a 40%/40% split near major market bottoms.
The 10-year Treasury bond reached our target of 4.7%, the low in March, and appears like it is putting in a low for yields. If stocks can hold near the April lows and turn higher, bond yields are likely to turn higher as money moves out of Treasuries and back into stocks.
The market is probably nearing a short if not intermediate-term low, but it is too early to jump back in.
It is always better to wait until there are signs that the test will be successful.<<< |
