INDEX UPDATE
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I have noticed some confusion with terminology concerning trends. I consider a DOWNTREND as something major, not just a 300-500 point drop, then of course we have short-term and mid-term downtrend. A real downtrend to me is the BIG KAHUNA where we just continue down for a long period of time, as we did with this UPTREND starting in 1994, and the price decline is not measured in hundreds, but in thousands.
Many only talk in UPTRENDS or DOWNTRENDS, but what do you call a period of several months where we just trade in a range and could be a large range of 1000 points, as we did from last AUG to JAN. For my future discussions I will call it a RANGE-TRADING-TREND, and of course there are short-term uptrends and short-term downtrends in the range-trading trend.
The reason I went to that extent of an explanation of trends, is that I now have plenty of technical confirmation that the trend is changing from an uptrend to a RANGE-TRADING-TREND, but not a DOWNTREND. If it was to drop over 1000 points I may consider a change to a DOWNTREND but that is definite either. For the interim I consider the RANGE to be 8750-9300, plus or minus 100 points. For those who follow Jerry Favors he stated for his approximations plus or minus 205 points with the high to be around 9600.
I feel that we are now in a range-trading trend since many indexes have now started short-term downtrends such as the:
XAL - AIRLINES
TRAN - DOW TRANSPORTS
PNX - PHONE
UTIL - DOW UTILITIES
UTY - UTILITIES
RLX - RLX
CEX - CHEMICALS
DRG - DRUGS
BKX - BANKS(needs a bit more confirmation)
These are not a few and they are important indexes, and for those who are DOW THEORIST the DOW TRANSPORTS & UTILITIES are setting the stage for lower lows and lower highs. Additionally, we can look at the action amongst the indexes that they are starting to diverge, which can be interpreted as a change in trend. I think the KEY is the divergence in the TRANSPORTS(ESPECIALLY AIRLINES) AND UTILITIES from the SPX/DOW/COMP
Also the SPX is now a CLASS 2 SELL and is slightly below setting a TRIPLE TOP, not just a DOUBLE TOP. The peak for the SPX is at 1132 and since my short-term technicals are indicating that it is a CLASS SELL, and it is still about 10 points below the peak of 1132, I do not think the SPX will break thru during this short-term cycle.
I have also followed the NEW HIGH/NEW LOW for both the NYSE & NAZ and they are also starting to DIVERGE. For a quick example, when the market was strong in FEB/MAR the NEW HIGHS for the NYSE, on a daily basis, was commonly in the 200-300 range. This past week the DOW regained all of its weekly loss and is only 60 points off its highs, but it did it with barely an average of only 100+ NEW HIGHS. My studies on the NEW HI/LO's is much more extensive than just that, but it would just take to much time to go into full detail. I also assume that we could also notice similar divergences in the ADVANCE/DECLINE and the UP/DOWN VOLUME. If anyone can comment on these 2, it would be helpful.
I am not saying that the BIG KAHUNA is coming, I am just saying that the trend change has been confirmed to RANGE-TRADING-TREND. Also this does not mean that some indexes cannot still set higher highs, but the limit is near, if not at the 9200 range for the DOW.
OK, per my short-term technicals, yesterday's action in the market has signaled many CLASS SELLS:
CLASS 1 SELLS:
MSH - DOUBLE TOP CHART FORMATION
IIX - DOUBLE TOP CHART FORMATION
OSX - TECHNICAL BREAKOUT (careful due crude prices rising)
CLASS 2 SELLS:
SPX
OEX
NAZ
NDX
BKX
PNX
XOI (CAREFUL DUE CRUDE)
XBC
RLX
CEX
FPP
Approximately 1 more up day and those CLASS 2 SELLS will become CLASS 1 SELLS.
As for the immediate few days, I feel that that is Monday is not down it should at least be flat (PLUS OR MINUS 30 dow points). I see a greater possibility of next week being down than up, and that the previous peaks in the major indexes will be the upside limits (DOW @ 9200, SPX @ 1132), if it gets that high.
For CANDLESTIC lovers, the SPX, OEX, DOW formed perfect "HANGING MAN" on the weekly charts, which is a strong reversal signal. It is also the first time a HANGING MAN appeared on the weekly charts since this rally started.
Here are the week's highs for the last 4-5 weeks in sequence:
OEX - 541, 542 543, 548, 542 (difference of only 7 points)
DOW - 9094, 9168, 9213, 9148 (difference of only 119, but if you consider only the last 3 weeks the difference is only 65 points)
Unless there is a major upswing, I feel there is enough confirmation that we have reached the top, within 100 points as a buffer).
Wow, this was long - hope I didnt bore you to death.
NOW THIS IS FOR FUN AND NOT PER MY TECHNICALS, although it does fall in line with my technicals somewhat. Here is a prediction from a friend of mine that has been quite accurate in predicting over the last week: MONDAY DOWN, TUE UP OVER 100 points(intraday), WED/THUR slightly lower than MONDAY's LOW. If this comes true I am going to freak out.
Seeya
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