So Much for the Big Surge (printed b4 market open today)
By Helene Meisler
Special to TheStreet.com
11/08/2001 09:32 AM EST
I could easily complain about the market's lack of follow-through Wednesday after its two-day run-up, but that really was to be expected. What's worth making a fuss about? I thought the Nasdaq and the S&P 500 would cross their downtrend lines, and folks would pile in and get more bullish. That hasn't happened.
Those indices should've crossed those downtrend lines and run higher, but they didn't. That's what it looked like in May: We can very easily see that surge on the chart. In the current market, I can barely see the crossing of the downtrend line without squinting. There has been no surge, no blowoff.
In fact, if I use a thicker pencil, it looks like those downtrend lines haven't even been crossed yet. Instead, we're stalling right at that level. These downtrend lines are important because as long as we hover below them, we won't get bears to turn bullish. Instead, they'll feel vindicated because we didn't cross them.
The rally earlier this week hasn't changed my momentum charts. The oscillator hasn't come close to making a new high. I even calculate a price momentum indicator for the Nasdaq (based solely on price, compared to the oscillator, which is based on breadth).
This type of action is typical, where we see the averages go to a higher high and the oscillator doesn't make a higher high. This is a sign of lower momentum in the market on this leg up.
In addition to the oscillator, we now have the put/call ratio (on a 10-day moving average) back at the lower end of the range. It can hover down in this area for a while; it doesn't have to rise. But if we can ever get that surge past the downtrend lines, the kind of surge that really turns people bullish, this indicator is telling us that such a surge will end this rally. |
