INDEX UPDATE
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Previously I had indicated that the SPX was still near overbought region as the NAZ was, that is incorrect. The SPX is in the lower mid-range approaching the oversold range as the DOW is.
Per my short-term technicals, we again have a situation where the DOW and the SPX are approaching OVERSOLD, while the NAZ is borderline OVERBOUGHT. The bias for all 3 indexes are now to the downside, for the short-term, but that does not mean much in this market since it can change directions in minutes.
Again there are 3 possibilities:
1) DOW/SPX pulls the NAZ down
2) NAZ pulls the DOW/SPX UP
3) they converge, which normally produces flatness
There's alot happening next week since we have the OPEC MEETING on Monday, and Greenspan on Tue, and quite a few important economic reports, ending with the monthly employment report on Friday(someone correct me if I am wrong).
Subjectively it appears that last weeks weakness in the market was partly or mainly caused by anticpations of this comimg weeks events.
In light of probably the most important events of week occuring on MON & TUE(OPEC & GREENSPAN), it is likely that MON/TUE could see continued weakness as we did last week, or at least flatness, which is also in line with my short-term technicals concerning the bias to the downside.
Once those are out of the way and there is no surprises, we should see a rebound to the upside by mid/week. If there is weakness on MON/TUE, my short-term technicals on the DOW & SPX will definitely be in the oversold range and could even be CLASS BUYS.
Now the next question is how strong of a rebound if it does happen.
Over the last 2 weeks we had major breakouts, starting with the DOW moving up 300 points the previous week and the NAZ popping strongly during the middle of last week with the MSFT announcement.
I took a look at previous patterns over the last 2 years, although possible, seldom did the indexes surge in such a short time-span. What I mean is that the DOW has already pulled back 160 points off of its intraday highs. For the DOW to get back 160 point loss and then suge again 300 points as it did the previous week is unlikely - that would be a 450 point movement which technically now is unlikely.
I am not saying that the market cannot rebound but just that the rebound that should start later next week will be off the torid pace we had in the recent past.
At this time 9000-9100 appears to be the top by mid-April, but if it does get there it will with some difficulties.
I am using MID-APRIL as the interim top inlight of the actual earnings coming out which will give the market further direction. If earnings are in line with the reduced street expectations we should still continue up, but, again, without the torrid pace we had previously.
For now the long-term technicals have not changed and the top for this rally should take place in MAY with a target around 9200-9300, if it gets there.
By mid-april I will basicly be short stock, and play the ripples on both the long and short side with options.
Beautiful day here.
Seeya |
