Peter Eliades' Stockmarket Cycles update for Friday, February 12, 1999. First a note: There is a market holiday on Monday, President's Day, so this update will remain on line until around noontime pacific time, on Tuesday, February 16.
We continue to be astounded by the market action. Today with the S&P Index at its high, less than 2 ½% from its all time high, the daily advance-decline line on the New York Stock Exchange was only 2500 units above its October 8 low. It is truly an historic divergence and the price will be paid, probably sooner rather than later, but the tricky part of the equation is that the advance-decline line itself is now so oversold, that it should be close to some kind of rally attempt whether it be just a short term one, or something even longer than that. That makes the short term analysis even more difficult because although we now believe there is a good chance that the top has been seen, the 1929 analogy saw the advances and declines deteriorate for a long time at equivalent levels of divergence before the final top was seen. That makes our job that much more difficult here, because although a very bearish case can be made from the market's miserable internal measurements, we do not have any high confidence lower projections to guide us for a potential big decline, at least not yet. Remember we did get a Meyers Advance-Decline High-Low Sell Signal yesterday and so far it was a very well timed signal. Do be aware, however, that not all signals, not even the most effective ones, saw the market decline immediately. There is much to be watching for over the next few weeks, and we will be doing that with you here on these updates. One technical note that we do not remember mentioning over the last week or so, is several days ago the McClellan Summation Index moved below the zero level. The market is most vulnerable to very sharp declines when the Summation Index is below zero and declining as it is now.
Mutual fund switchers, Rydex switchers are in the Ursa fund. Fidelity Select switchers are in cash. All mutual fund switchers should call after 3:20 p.m. each market day and should call each market evening.
Stock Index Futures traders, you shorted the opening on the March S&P today at 1253.00. Tuesday place your initial stops at 1259.20. Attempt to cover at 1227.60. If you are stopped out, or if you do cover at 1227.60, you may reshort on a move below 1219.10 with a stop at 1232.10.
March bonds almost gave and confirmed lower projections to around the 114 level, but they have not been confirmed and they are now very oversold.
The XAU is also in important territory as it has lower projections outstanding, as we have told you over the past several weeks, but after today's strong rally, a follow-through to the upside could begin to invalidate some of those downside projections. We have much to watch for next week. Have a great long President's Day weekend. Make it a safe one. We'll talk to you Tuesday evening.
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