Ralph Bloch?s Weekly Commentary
Fully In-Gear
Monday: 12/03*
Where shall we start? The severe crisis in the Middle East, Argentina, the biggest bankruptcy in U.S. history courtesy of ENE or, from a technical viewpoint, the negative non-confirmation set up last week. All more than enough to send stocks sharply lower - the DJI was down 146 points at worst with a close of down 87, and NASDAQ down 31 at its low with a close of down 25 points. The Advance-Decline index was in line with the DJI all day with final readings showing 603 net declines. The Puts-Calls ratio was 175% at noon, 164% at 2:00 p.m. and 149% at the bell - we still need much higher. News as of 6:00 a.m. announced that Israel has bombed Arafat's headquarters, but he survived. Losers of over 1 point were GE, IBM, JPM, PG and UTX. The new short-term reaction low of 9700 held, and the late rally helped it close above that level. This is the second time in a few days that this sequence occurred. Therefore, a close below that level would likely send the market lower by a couple of hundred points - if not more. If this is correct, traders might want to use any strength for raising some cash. This will be particularly true if any rallies occur on low volume, lagging breadth and low Puts-Calls ratios.
Tuesday: 12/04
If any of you had told me that the market was going to do what it did Tuesday, I would have hung up on you because you were too stupid to talk to!! Shows you how smart I am!! Solid plus openings of 59 and 24 just after 10:00 a.m. led to an up-all-day affair with the market getting a real set of legs the last 1-1/2 hours. The DJI and NASDAQ ended at their highs of up 130 and 58. The SOX index exploded with a 33-point gain, which led a very strong tech sector - just great leadership!! My advice to sell rallies if the internals were weak didn't fit, as the internals were strong. The Advance-Decline index was very much in line all day, and they closed with 1246 net advances - as we've said, leadership was solid. The drugs were lower as they usually are when techs are running. Leaders were IBM (breaking out), MSFT, MMM, HD, etc. For the past two weeks or so, the DJI has been stuck in a 9700-10000 trading range - I found it to be a difficult period. Part of what spooked me recently was the negative non-confirmation set up a few weeks ago. I'm happy to report that this technical problem has been eliminated as a result of Tuesday's action.
The DJI, NASDAQ and the Advance-Decline index closed above their most immediate prior rally peaks - the market is now in a fully "in-gear" position, and that's bullish!! The "reasons" for Tuesday flowed back to a growing belief that a recovery is around the corner, coupled with huge levels of available cash. We've already stated several times that managers will have to follow strength, even if they disagree or don't understand the reason for the rally - they can't be left behind!! Closes over 10000 and 2000 would help.
Wednesday: 12/05
An explosive second up day, as the techs put in one of the most impressive performances in a very long time. My favorite group within that sector (semis) was up a monster 7% on top of Tuesday's huge gain - this is, as we've said 100 times before, the best area to provide leadership. Some of the gains were 10% or more, as DRAM pxs jumped very sharply overnight. MU opened 3-1/2 higher, along with sharp openings by TXN, VTSS (a reco Wednesday), NSM, etc. Both the DJI and NASDAQ closed at or near their highs of 220 and 84, respectively, as volume expanded to impressive levels, which is, of course, bullish!! The Advance-Decline index held very nicely to finish with 953 net advances. The closing Puts-Calls ratio was 173%, which is an impressive figure, given that the DJI rose 220 points and 350 points on Tuesday and Wednesday - we love these figures.
Conclusion:
Wednesday, one of our main positive points was the fact that the minor negative non-confirmation set up on 11/27 was nicely eliminated, and that's a plus. Good statements by CSCO and ORCL were also strong positive factors. Wednesday is what can happen when the market goes back into a fully "in-gear" position. Both 10000 and 2000 were finally overcome, and that's a positive. In recent weeks, we've pointed out that while 10000 represented some overhead supply, it got heavier starting at 10200 - we got real close to that level Wednesday, and we'll see how much difficulty that level provides. It will not, I think, slam the market lower, but maybe the advance gets a little "choppy" as it pokes into overhead supply. There was little selling pressure, and our near-term theme is "buy the dips".
Ralph Bloch
Senior Vice President
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*12/03? So I am a little behind the times |
