Bloch Weekly Technical Market Report
"A RALLY TRY"
Below are last week's closing comments.
"Our 'guess' of a 2%-3% drop fell into place - so far!! Using intraday figures, the DJI has fallen 4.4%, and
using closing figures, 2.2%. As we said Wednesday - these numbers aren't etched in stone. So, we need
to 'see' other things in order to get bullish. The first thing we need to see when the first rally try begins is
how much volume is generated, and what kind of Breadth readings do we see? Really low volume and
really lousy A-D figures would suggest a 'vacuum-filling' rally that should be sold into - let's wait!!"
The Investors Intelligence Advisory figures peaked last week. They were significant, but not quite a disaster.
This Week
Last Week
Bulls
52.5%
54.3%
Bears
26.3%
23.3%
Correction
21.2%
22.4%
Monday 7/27
On Friday, we felt that a rally try could start any time between then and Tuesday. Friday's action was "practice" for Monday.
Down 82 at 10:00 a.m. led to several moves before a rally began at 1:00 p.m., which got legs late to close plus an impressive
91 points - a solid reversal! A market that, measured by Breadth, was very oversold, plus Mr. Biggs from MWD called for a
20%-30% bear market. Be aware that he basically said the same thing at the low last October. Volume was 618 vs 682,
which was high for a Monday. $'s flowed from Bonds into equities, as they fell 10 ticks. A 5-3/4 point gain by AXP and gains
of more than 2 points in CHV, GM, UTX were 43 points of gain. The RUT fell 5-1/2 and is down 6-1/2% the past six days -
wait for a group to start up so you're not guessing!! The OEX P-C Ratio was 114% at 11:00 a.m. and 122% at the bell -
lower readings into further rally tries would be a negative. Higher readings into strength are a plus. At its worst, the A-D Index
showed nearly 1700 net declines. Final readings were 1130 net negative. It is now 14711 from a new high. It fell below its
prior reaction low in June, as did the RUT. NASDAQ reversed sharply from down 43 to end plus 2-1/4 points - dramatic, to
say the least and most impressive!! Leaders were the usual - MSFT, INTC, DELL, etc. The NDX index, which is a closer
measure of the big Technologies, rose a whopping 17-3/4, having been off 54 - holy smoke!! What happens after a selloff and
positive reversal? As always, there are several possibilities. First - a "V"-type reversal, where the Market just runs in a straight
line with little or no pause. This is always possible, but it's a lower percentage play. Second - the list undergoes a more usual
reaction low (Monday) - rally (Monday was a start) - test of the lows. That's a higher percentage bet, and one that I would
prefer. The key items to watch during any further rally tries will be volume and breadth - let's see.
Tuesday 7/28
There are just too many "Monica" jokes to relate - so, I'll act mature (for a change) and pass. At any rate, the news about
"Monica" placed some additional pressure on a market that was already greatly weakened. Why, I'm not sure -- more
uncertainty. The list opened 56 lower and fell to minus 200 pre-1:00 p.m. - rallied to down 122 -- down 212 at 2:30 and
ended down "only" 93 points on volume of 699 vs 618. Bonds fell 12 ticks for the futures. Remember that the Market always
does what it was going to do, but sometimes, news events exacerbate a trend already in force, such as those huge sell
programs that rolled through Tuesday. The OEX P-C Ratio frightened me as it fell into weakness to 110% at 11:00 a.m.,
104% at noon, 132% at 2:30 p.m. and 130% at the bell - should be higher, given the Market's weakness. Does it drop in the
next rally?? I'm out of adjectives trying to describe an A-D Index that is just getting shredded!! There were 1337 net declines,
putting it 16048 from a new high. NASDAQ fell sharply by 36-3/4 points, almost giving up what it made during Monday's
reversal. The NDX Index dropped by 33 points. NASDAQ is now down 5.8% on a closing basis. Using the trendline scale,
we find the Market is finally in legitimate oversold territory with a reading of minus 5.5. That's the lowest it's been since
October 1997. In Tuesday's letter, we discussed two possibilities for the Market. I forgot to discuss the third - namely, that it
just goes lower!! Can Tuesday be viewed as a "test"? It can, but it was very flawed. Most "tests" show some signs of relative
strength via lower volume and better Breadth - neither of these was present Tuesday. So, we still need to see more and better
data before I can get excited. A lower opening leading to a higher close would help.
Wednesday 7/29
"Mr. President, you have until sundown to get out of town!!" An interesting morning, as the list opened plus 60 by 10:00 a.m.
It then fell to down 28 -- down over 40 late, with a close of off 20. Volume fell to 634 vs 699, and Bonds fell 6 ticks for
futures. The DJT fell sharply, by 75 at worst, and ended off 69 points at 3245. This is below its early June reaction low of
3250, and this constitutes one-half of a Dow Theory sell signal. If the DJI breaks below its equivalent June reaction low of
approximately 8626 (closing), that would be a full sell signal. What does this generally mean? History suggests that this type of
signal comes late, and px's generally fall a little bit more, and that's it!! IBM rose 2-1/2 points, and that washed the WMT loss.
The OEX P-C Ratio rose sharply (thank goodness) to 163% at 11:00 a.m., 165% at noon and fell a bit to 134% at the bell -
still o.k. The A-D Index looked good at 10:00 a.m., as it posted 926 net positive at that time, as the DJI was plus 60.
However, as the Market fell to minus 53 at 3:00 p.m., the A-D Index collapsed to close with 290 net declines - awful!! It has
now fallen 13 days in-a-row!! NASDAQ was plus about 19 at best. It too fell to end down 15 points, which was a worse
performance than the DJI. DELL, MSFT, INTC, CSCO all fell, but the real culprits were the Internet stocks, which got hurt
pretty good.
CONCLUSION:
The DJI has been "holding" within the 8825-9025 range the past four days. These have been characterized by high volume and
a great deal of volatility on both a day-to-day basis and intraday - just what we had outlined was needed for a bottom. It now
had better start up and out of this pattern - real soon! Volume and Breadth during a rally try will be critical. |
