Anyone know if Drakulich is any good? Another in the buy the dips crowd.
Wave Signals Commentary
By Mike Drakulich 8-23-02
Bear Rally? How big, how far? Or something else?
A few weeks on Aug 6th I wrote about the Naz/Naz 100 delayed 8-9 "trading" day low scenario, and how I thought that it was a good possibility again, the Naz 100 did bottom on Aug 5th. And, also that there looked to be a very good chance the S&P/Dow were making a secondary low.
That scenario panned out perfectly and we have seen another very strong leg higher, as well as the Naz/Naz100 "kick in gear". In fact if the Naz 100 closes up this week(above 996) it will be the 3rd straight up week, only matched over the past 2 years by the initial rally off the Sep lows.
There is a lot of "evidence" that this rally has further to go in both time and price, and that the Naz may very well outperform percentage wise from here.
The NYSE McOsi closed at plus 236 yesterday, a new high for this rally along with price, and the highest level since the rally off the lows in the Fall of 1998. Also, 14 bar RSI in both the NYSE and S&P did make new rally highs along with price yesterday. This type of action where
internal technical gauges "confirm" the price tells us that this is a very "healthy" overbought condition if you will, as opposed to an overbought that one would view as bearish and at the potential end of a bear market rally. Guarantees? No, of course not, simply very high probability evidence that this rally has further to go in both price and time. I have in the past several days mentioned that I thought this rally would likely at least match the extent of the rally off the Sep lows, and in my opinion likely
exceed it. At yesterdays highs the S&P was almost the same 24% off the July 24th low, and we're in the 5th week from that low. From the Sep lows of last year the S&P rallied the same 24%, but it took 19 weeks. Also, and I think a key here, is that the Naz 100 is now up 22% off this months
lows, while from the Sep lows of last year it ultimately rallied 59%.. And technically, at the early Aug lows the overall intermediate term technical divergences in the Naz 100 we're much greater than seen in NYSE or S&P, and also much greater than seen at its Sep lows. That in my view argues that the August lows just seen have a good chance to be the most important low in the past few years. Therefore the largest "percentage" Bear rally would not at all be a surprise. The weekly and monthly Ewave patterns in my analysis also support that as a good possibility.
I think the Naz/Naz100 which also had that same 8/9 trading day "delayed reaction" this time as in Mar/April and Sep periods of last year, is now likely in the "catch up phase", and should outperform in the weeks ahead. Again, this is "if" we follow a similar pattern, and my analysis of the technicals and Ewave patterns suggest that is a good likelihood. All this being said, in my view it suggests the strategy is to buy dips in the Futures when it looks like a good sized correction is completing, and hold or accumulate "Naz/Tech" positions on weakness, as if I am correct it has a very good chance to outperform with lesser pullbacks at this time. And with the very overbought current condition, a good sized correction is very possible if not likely in the next few days.
Sentiment basis a survey like Inv. Intell, is in the "Bulls camp" at this time. This Wednesday the I.I survey came out showing the 40% Bears and 36.7% Bulls, that was the 2nd highest level of Bears in the past months, and we saw that with a huge 20% plus rally having occurred. That kind of "disbelief" is another ingredient that can and probably will allow for this rally to continue over the next several weeks at least. I am making NO assumptions whether this might simply be another Bear rally, perhaps the largest since the bear began, or if the Dow and S&P might even be in a new Bull market. I, or anyone else simple does not know, and it's way too early in the game anyhow. And over the next several years we could easily see a series of "mini Bulls" and "mini Bears" that serves to frustrate die hard Bulls and Bears alike. For now the evidence as I see it continues to suggest higher prices, especially good "catch up" potential in the Naz/Naz 100 area. I do think a good sized correction is likely at any time here, but dips should be bought for now. Keep those "traders hats" on. |
