INDEX UPDATE
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The DOW ran up about 600 points in about a month or so and gave back about 400 points in 4 days - obviously that is not a good sign. Many of the bears are now coming out talking about the Big Kahuna. I too have gone negative on the market as indicated from a previous post.
We really don't want a true BEAR MARKET, just a correction.
HOW LOW CAN WE GO - I had previously indicated in the spring that I felt that we could get to the 7700 range, and on Friday we heard from JERRY FAVORS of 7300 as a possibility, and other bears even lower.
We can all guess how low we go, but the simple key to watch for LOWER HIGHS and LOWER LOWS.
Technically, there are very few bright spots and many of the technical signs are turning or have turned negative.
This week should bring an upswing and it would be a good time to consider reducing/exiting long positions.
Right now my short-term technicals are in the oversold region and once they get to the midrange I will probably start to initiate PUTS. I may not wait for them to get to overbought. MON and TUE are important days - if the market does not pop at all it will be a very bad signal. To explain - during the strong runup from JAN-MAR, I received many CLASS 1 SELL signals and they worked - the darn DOW dipped a whopping 50-150 points and sometime only intraday(couldnt make any money on PUTS). If the opposite was to happen to the downside whereby MON/TUE continues down it would signal a very strong early warning sign to exit quickly. Keep in mind that FRI did pop almost 100 DOW points off the intraday lows, per my CLASS 1 BUY signal.
I am saying that MON/TUE should be up or at least flat, but if it is down that would be something like an air-raid siren to me to get the heck out quickly.
Just to recap, here are some of the negatives:
1) ADVANCE DECLINE LINE going negative
2) NEW HIGH/LOW going negative
3) weak UP/DOWN VOLUME
4) INTEREST RATES creating higher lows hinting further increase
5) last week was largest OUTFLOW of funds for 1998 so far
6) STOCHASTICS heading down
7) MACK heading down
8) important MOVING AVERAGES like the 50,100 and a few 200's being pierced
9) RUSSEL 2000 just went flat for the whole year confirming that this rally is narrow
10) McClennan Oscillator and SUMMATION index heading down
11) important support lines were broken to the downside last week
Technically, there is one important sign that has not yet broken to the downside and that is the previous valley at around 8600 which means that we have not yet created a major LOWER LOW. If and once that is broken to the downside there is not too much good that can be said on a technical basis for this market.
Seeya |
