Monday Jan 15 update from GEM-X
Another day, another bad candle on the COMP DOW and SPX...
Today, the 3 major indexes broke their .618 fibonacci retracement from their
Dec lows to January highs, but the volume on the move down wasn't
excessive...but the internals were a bit negative. Down volume swallowed up
volume on all three indexes, and the a/d lines were pretty bad. All this
carnage, and the VIX barely popped up to 25.03. Merrill was throwing
everything into the dumpster...wonderful.
The next major and important level of support is the .78 fibonacci
retracement. This level of retracement has in the past 3 months been the
maximum amount before the market turned up in the past.
On the NASDAQ, the move from 1918 to to around 2002 in middle of December to
late December was retraced to exactly .78 (1936.56)of that move, and rallied
from that level to 2098+.
The levels to watch tomorrow and this week are 1955/1956 on the NASDAQ,
9820/9830 on the DOW and 1128/1130 on the SPX. There MUST be a bullish
reversal candle at those levels, or we're going to test the December lows...
The big problem, is if we break the Dec lows on all three indexes...the
rallies on all three to the January highs had divergences on the RSI, meaning
all three indexes made new highs, but the RSI didn't confirm it with a new
high of it's own.
All three indexes need to break out to new highs this month, with the RSI
following it, or the the correction we've seen so far, is just the start of
it.
The DOW retraced .618 of it's entire drop from 11908 to 7926, the NASDAQ .236
of it's move from 4252 to 1387, and the SPX .618 of it's drop from it's May
2001 high.
What gets to me is the move on the NASDAQ...I would hate to see the NASDAQ
break down miserably....if it does, than the move from 1387 to 2099 would
qualify as just a Wave 4 from the move down from 5133 in March 2000 to 1387
in Sept 2001. That 2100 level, for some reason has been extremely tough
resistence in the past 6-8 months. For the NASDAQ to be in Wave 1 of a bull
market, it would have had to retrace .618 from Wave B to Wave C, which is
3157 (4252 - 1387 X .618). If 1387 to 2100 was just Wave 4, there would be
one more wave down....
I like the fact that the DOW's move from 7926 to 10345 can qualify as a Wave
1 move, because it retraced .618 of the entire drop from it's all time high
of 11908 to 7926, so that's a good sign.
But because the DOW SPX and NASDAQ could be entering into a Wave 2 this early
in a move, during a seasonably strong month, could forecast a bad 2002. I
hate to sound bearish like this, but the last times I remember the markets
dropping like this as a result of index futures, like the QQQ Jan 40's and S &
P Futures contracts, being dumped were back in March 2000 at the top at 5133
and late May 2001 when the NASDAQ was at 2328....Also, what's pretty bizarre
too, as that the top of 5133 and 2328 both coincided with bonehead
anti-business attacks by democrats (I'm not dissing any political party..it's
just known fact that market tops have come at times when democrats have
attacked "big business" and won. Hochberg himself, in an interview, has
mentioned this fact himself. I believe he mentioned RCA, but I wasn't
around to witness any of this..). At NASDAQ exactly 5133, the market
crashed when the government attacked Microsoft, I'm sure many of you remember
this. That Monday the NASDAQ crashed 500+ points before reversing. At
exactly, NASDAQ 2328, the balance of power in the Senate shifted, when a
former independant became democrat. Oh yeah, and I almost forgot, NASDAQ
3000 last year during Al Gore and "the will of the people." And in
December, NASDAQ 2066, the much anticipated economic stimulus plan was
slaughtered, thanks to Mr. Daschle. In the 1930's during the Great
Depression, a democrat led government helped extend a deep economic
depression, by taking all the money from the rich and giving to the poor.
That's fine and dandy if you're a happy happy joy joy kind of guy, but this
shift turned the recession in the 30's into the Great Depression...read all
about it...I'm not kidding. I have a feeling that our Santa Claus rally
had no bite thanks to Daschle.
So, this week, be very cautious, especially with this week being expiration.
Again, I'll be watching fibonacci levels, (.78 retrace of all three indexes),
and the candlesticks. There needs to be a harami, piercing line or hammer
on the .78 support level for me to be aggressive on the long side.
Also, the next extremely important levels are the Dec lows, with around 9700
on the DOW, 1918 on the NASDAQ and 1117 on the SPX. If the indexes drop to
those levels and rally hard than, the retracement would be a healthy
one...those three levels are the bottoms of their previous wave 4's which is
usually the maximum retracement levels on a bullish upwave.
A total breakdown on the indexes, and I'll be giving a few short calls
soon...
But here's one...NVDA broke it's .500 Fibonacci retracement level of 60.23
today, and the MACD is crashing through the floor. From what I heard, the
20 million shares that NVDA wanted to sell back in November are being
unloaded...the move down has been very VERY unnatural, and broke the natural
flow of it's bullish wave. It's next level of support is it's 50 day MA,
than it's .618 retrace of 52.69. I hate to say it, but NVDA has turned into
a short literally overnight. E-mail NVDA management and thank them for
screwing a lot of people.
And a couple more:
Also, if you look at the charts of ERTS and THQI...
THQI, if you look at the 3 year chart hit it's 5 of 5 in December, very
textbook move, and is dropping very hard. From $8.00 in April 2000, to
$65.00 in December, which means it's got a long way down. .382 retracement
of the entire wave is 43-44 (just about broke it), .500, 36-37, and 29-30 is
the .618 retracement. "5 of 5's" are a short's dream, and that's what THQI
has had. It's gotta hold 43-44 in the next few days, or it's gonna visit
the 30's..
ERTS has a more bearish chart...it's had a "leading diagonal", or a "rising
wedge" from $25 in April 2000 to $67+ in Dec 2001...rising wedges usually
retrace to the starting point of it's intial move...which is $25.00. Pretty
textbook, 3-3-3-3-3, A-B-C-D-E.
So if the NASDAQ breaks down, those three are prime short targets.
-gem-x
I'm not a perma-bear, or a perma-bull....I read it as I see it.. |
