I perceive that the market is still in muddle mode. Or perhaps I'm just looking at too many different indicators to find any clarity, but here goes:
Market Direction Thoughts 3/27/04
Commentary on Previous Reports
Last week I wrote of “rolling off the high shelf”, which is what we did on Monday. But the markets made a nice comeback late in the week. The $COMPQ closed slightly higher on the week, while $SPX closed ever-so-slightly lower. This is rather fitting given the ambiguity of the signals last week.
Commentary for This Week
$COMPQ found some support at 1900 and now finds light resistance at 1975. These levels are both within the 1875-2000 range that I mentioned last week, so nothing has really changed. The index now has 3 lower lows, and we will see very soon if the next high is lower than the previous 3 highs. Weekly ORMA (a home-grown oscillator) shows nothing new. At Friday’s close of 1960 I note that Bull Strength is lower than it was during the prior week when $COMPQ was around 1950-1960, so this does not support a continued rise.
P&F chart is still on high pole warning, but hasn’t broken support:
stockcharts.com[PA][D][F1!3!1.5!!2!20]&pref=G
$SPX bounced off of nowhere, as if by impulse rather than reason. Daily ORMA shows a higher bottom, which offers some hope. Weekly ORMA is still dropping at around 50%, so there is further to go in the downward direction. I noted last week that $SPX has support at 1060 and 1030, and resistance at 1120-1125 and 1160. I can now add minor support at 1087. The low at 1087 noted minor bullish divergence with respect to Bear Strength when compared with the low at 1103 of the prior week.
P&F chart remains strong:
stockcharts.com[PA][D][F1!3!1.5!!2!20]&pref=G
General:
Bull/Bear strength calls for a resumption of the downtrend over the coming week.
P&F BP’s
BPINDU reversed down, but remains at very high levels:
stockcharts.com[PA][D][F1!3!2.0!!2!20]&pref=G
VIX
- Daily: ORMA oscillator looks prepared to fall further, meaning the market looks ready for some days of upside. Another home-brewed oscillator makes allowance for upside lasting a few days, but indicates that the market is approaching over-bought.
- Weekly: ORMA oscillator looks like we’re having a bull market dip and ready to resume the uptrend. Weekly view of home-brewed oscillator offers hope for several weeks of upside. (vs. last week’s indication that a significant downturn has begun).
Bull and Bear Strength show slight bullish divergence from the indices, but also look ready to resume the downtrend.
There remains considerable ambiguity regarding market direction, with some preference given to 1-2 days of upside followed by additional downside. The only thing I see that might put the $SPX over its triple top is if we catch Osama Been Hidin.
Promising/dismal sectors:
Japanese stocks are in break-out mode and can be bought here. Many other composites have contrary reads, depending on whether one looks at the next few days or the next several weeks or months.
In summary, the strength of last week’s reversal is nothing spectacular, but it was broad-based as many composite measures (indices, holders, etc) closed higher on the week, so I think that we will see an effort to put in a bottom. That means that I expect more clarity in market direction by this Friday, but that it’s murky right now. Those itching to go short can short small positions right here, but risk/reward is not favorable. Or one can wait until the indices approach stronger resistance levels for more favorable short trades. Weekly ORMA oscillator is promising for the bulls, but I’d wait until a stronger bottom is in place, or a significant breakout occurs before committing funds to long positions. Bulls don’t want to see SPX break below 1087.
Disclaimer: Everything here is my own opinion only, and it’s worth what you paid for it. I’ve been known to be wrong at times. And I’ve been known to be right at least half as often as I’ve been wrong, though I haven’t kept records to support that claim. And just because I've posted two weekly columns doesn't mean that I'll make a similar post every week. Any complaints from The Management will result in immediate cessation of further Market Direction Thoughts. |
