Chris and thread,
I have not been around much as of late but over the past couple of weeks I have managed to post a couple of things on various threads. Nothing substantial, just outlining some of my views on where I believe we are and more importantly where I think we're going. But because I received a couple of pm over the past couple of days I thought it would be a good idea to put together a more comprehensive post if anything just to add more confusion into the mix. Let me start off by saying that my views are based strictly off of my interpretation of the charts. My tools are grounded in what I believe to be the two most important aspects of TA, price and time. These two elements have guided me through some of the most volatile timeframes in recent stockmarket history. They have also been the basis of my opinions, which like everyone else on SI, I have freely shared over the years. Why post now? Because I believe we are heading into another crucial time period for prices overall. Actually things have already begun to unfold, and so far the winds are not blowing at the back of prices. In my recent posts I have pretty much kept my comments to the CSCO's and AMAT's of the world. Just because they have been so timely. But yet my views for these two stocks are universal for most of the major players in the market (i.e., tech, large cap). My work tells me that prices for most of these companies are dead in the water through the first quarter of the year. That means that prices on a individual stock basis will be unable to advance or break out of the resistance on the charts. That's one part of the equation. The second being that prices are about to get hit by the downward pressure that started roughly two years ago. The DOW, NAZ, S&P and SOX........ have price patterns that tell me that it's time to either break one way or the other. Now if you buy into my argument even just for a second you will see that these two observations are diametrically opposed to any bullish outcome. You cannot have individual stocks locked in a time zone for the next six weeks while the major avgs are going to be buckling under huge historical selling pressure. The only possible outcome can be a major breakdown in prices overall. An event that should play out over the time frame that I mentioned.
This is a quote from the McClellan Market Report in Barrons over the week end "The late January bottom we were looking for has arrived, although, for some indexes the bottoming action continued into early February. But the rest of February should see a tremendously powerful rally." Now I'm like anyone else when I read that, it makes you second guess your own work. Especially when your own views are so different. But trust me when I say it to have a tremendous rally you need an overall structure on a individual stock basis that will support that sort of a breakout. Now take a look at some charts. CIEN this week closed at $8.73. The low in September was $9.20. That's right, we haven't seen these prices since 4/99. And prices haven't yet bottomed (the all time lows of $4.06 set back in 98 is going to be like a magnet pulling prices down over the next couple of weeks). CSCO which I commented on last week over their earnings announcement broke $18 (critical support post 9/11) and has not been able to close above since. Is this the precursor to a huge advancement in prices? Not on most of the charts I've seen over the years. I follow roughly 125 companies and indicies and already a whole host of them have already taken out last months lows. The bottom line is prices are rolling over. That 1st quarter resistance I spoke about is holding price at bay while that downward trendline is beginning to do its damage. The weekly close (this week) on a majority of stocks that I follow was nothing short of butt ugly. A further indication that the selling pressure will continue into next week. Stocks like HWP, QCOM, VRSN, CHKP, ANEN, CSCO, SUNW, HGSi, TQNT, ISSX, ALTR, ADVS, AOL.... should offer no shelter for the weary investor. Here are a couple of other things to look out for over the next couple of week:
The utilities are at a crucial support with the heat beating down. A failure to hold could push the index down to the 225 level.
The bond market could be at a turning point. Either way expect a more pronounced move to happen shortly.
Japan. I don't "buy" the recent rally in the Nikkei. The upmove in prices should be running into a brick wall soon. I view the recent price movement as nothing more than wiggle room on the monthly chart. By the end of the month the pressure will force prices back into a "make or break" position.
Based on the cross section of stocks that I follow the pressure should be broad based. They represent the SOX, Bios, Tech, Utilities. Once again nowhere to hide.
Like I said a 1st quarter call. Of course the market can make a liar out of me by rallying hard and breaking through this resistance I'm talking about. If it does it will most likely come on the back of some news or event that is totally impossible to predict. But based on the current structure of the charts, a gamble I am willing to take. One thing for sure, I believe the market will prove me right or wrong in the shortest of time frames. Once this quarter is over I reevaluate based on the way things play out.
Always flexible.
Regards,
SO |
