Mark Leibovit is a good read - here's his latest:
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11/23/98
VOLUME REVERSAL SURVEY
By Mark Leibovit
The stock market still looks great.
We've come a long way since my October 9 "buy signal" for index and mutual
fund timers, but there is, as yet, no compelling reason to sell. The
October 9 buy signal was a great call, but a lot of credit should be given
to my Annual Forecast Model (AFM) which since 1998 was telling us that
early October could be the launching pad for a huge year-end rally.
Contrary opinion also had a lot to due with it. On October 8, a notable
market analyst was being quoted on national financial television as
predicting a further decline in the Dow Industrials to 6700. In addition,
we were coming off a perfect 'double-bottom' formation in the Dow
Industrials at 7400. And, October 8 was a day that over 1 billion shares
were trades, a good sign NYSE Specialists were accumulating shares by the
truckload.
Anyway, that's all in the past. As the expression goes: "What have you
done for me lately?"
Volume has been increasing to the upside as the blue-chips have been
rallying. I can say with a relative degree of confidence that a move in
the Dow Industrials to or through 10,000 is highly probably in the next
couple of months. Leadership in the high-techs has been superb as witnessed
by a series of new record highs in the Nasdaq 100 index.
Meanwhile back at the ranch, economists have been calling for a recession
next year, apprehension over whether the U.S. will bomb the living
daylights out of Iraq continues to surface, concern for Far Eastern
economies (especially Japan) relentlessly receives press and the fear that
the world will end due to the computer problem known as Y2K is becoming
more and more talked about.
The volatility of the market this past year has been extraordinary. Not
only have we just experienced the largest bull market rally since 1982
(soon to be surpassed), but we just came off of one of the nastiest
corrections (bear markets) in quite some time that lasted between February
of this year and early October. Some say the bear market was worse than
the Crash in 1987 or the 1973-74 bear market for a variety of reasons, not
all of which I agree with. All of this in one year! Can it happen again?
Could 1999 see similar volatility in both directions? Sure it can. But,
for now we are enjoying a super upmove in the market. As I've said before,
let the market tell when it ready to decline. Let's not guess about.
Let's not loose sleep over it. When it comes it comes!
Very short-term, it appears the market can move higher early this week, but
encounters a cyclical 'change point' on Wednesday. Ideally, the market
rallies into Wednesday and then pulls back. If a pull back unfolds first,
use Wednesday as a buy point. A new trading objective in the OEX (S&P 100)
was formed in my work on Friday pointing toward 584.00.
Volume started to appear to the upside in the oils and oil service stocks
on Friday. Several Positive Volume Reversals (tm) were generated. Because
there have so many false stocks in this group, I prefer to wait and watch
before recommending purchase.
Sepracor (SEPR) targets to the high 80s, Federal Express (FDX) into the mid
60s, PSI Net (PSIX) into the low 20s and Agouran Pharmaceutical (AGPH) into
the low 50s, just to mention a few many names. Stay with the indexes. My
favorite, of course, is the Dow Jones Diamonds (DIA).
The bond market is starting to look better. A Positive Volume Reversal (tm)
was formed last Wednesday and bonds have ticked up slightly since. Further
followthrough on volume would lead me to believe that a retest of recent
highs is possible. In this scenario you do not (do not) want to see recent
lows broken. If so, the positive is negated.
Gold shares bounced a bit last week, but so far unconvincingly. Though I
remain quite positive on gold shares on a longer term basis (1 year or
more), we have definitely run into a wall as far as making further upside
progress. A breakout above 87.53 would be the first step in reasserting
the uptrend (next target 98.00), but I think gold itself needs to
participate with conviction next time around, otherwise the rally may be
doomed.
Mark Leibovit
VRS |
