Hello SO,
Good to see your comments.
I've always believed Zweig had it right when he said "The major direction of the market is dominated by monetary considerations, primarily Federal Reserve Policy and the movement of interest rates."
We discussed interest rates recently, and I think the break, and/or divergence I've been looking for is beginning in the interest rate versus stock movement. For example, The Dow Jones Bond Average, which I previously presented at Message 7842134
is now down to the 103.2 box --. But, for the first time in a while now the actual number is 103.28 - that is it's moving up instead of down. When the Dow Jones Bond Average gave a sell signal on 2/4/99, the TYX was at 53.02. Historically, as the Bond Average falls, the TYX goes up. The TYX P&F chart looks like:
58.80
58.75 X
58.50 X O
58.25 X O
58.00 X X O
57.75 X O X O + < Short Term Uptrend Line
57.50 X O X O
57.25 X O + + < Bullish Resistance Line
57.00 X X + +
56.75 X X O 4 X +
56.50 X X O X O X O X
56.25 X O 3 O X O X O + X
56.00 X O X O O X O + X +
55.75 X O X O X O X X +
55.50 X O O X O X O X +
55.25 X O X O X O X +
55.00 X O X O X O X + < Revised Bullish Support Line
54.75 X O X O X O +
54.50 X O O X +
54.25 X O +
54.00 X +
53.75 X
53.50 X
53.25 X
You can see that it reversed down today after hitting a high yesterday. It's sitting right on support from a Short Term Uptrend Line and one box lower is a Bullish Resistance Line. More importantly, this is now a Low Pole Formation signal in that the last column of X's went three boxes above the previous column of X's and then gave up more than 50% of its move on the reversal down. And, 80% of the time a High Pole Formation leads to a sell signal -- and I expect (hope maybe<g>) to get one.
Add to that the fact that the Dow Jones Utility Average rose two more boxes, makes me happier yet, as follows:
322 X +
320 X O + X
318 X O + X
316 X O X * + X
314 X O X O X * + 5
312 X O X O X X O * + X +
310 X O X O X O C O * + X +
308 A O X O X O X 1 X * + X
306 X O X O X O X O X O * + X + X
304 X O X O X B O O X O + * X O + X
302 X O X O X O X * O O + X * X O + X
300 X O O X O X * O X X O X O + X X
298 X * O O * 2 X O X O X O 4 X O X
296 X * * O X O X O O X O X O X +
294 X * O X O X + O X O X O X +
292 X * O X O X + O O O +
290 X * + O X 3 + + < Bullish S/L
288 X * + O + *
286 X * + *
284 X + * *
282 X + * * < Bearish Support Line
280 X + *
278 X + *
276 X + *
274 X + *
272 X + *
270 + * < Bearish Support Line
Wow, what a chart! Yes it's extended -- but look at that run. Two more boxes up today and the TYX reversed down! Now it's within one box of its all time high that was hit back in Oct of 98. So, there is big time horizontal resistance at 322 and a Bullish Reistance Line is there as well.
Tonight -- (and I'll change my mind on a dime if my indicators change) I think interest rates are going to drop, the DJUA will pullback some and then break through 322 and lead the charge for the DJIA. How can this be?
Our main P&F market indicator, the NYSE Bullish % Index is rising (see the MDA thread). That is, more stocks are going on buy signals than sell signals, and that can only mean that the equity market is broadening and more stocks are participating,-- and it's not overbought. As a matter of fact it's within one box of turning to Bull Confirmed at 60%.
Yes the short term bullish % indexes are overbought but they can stay there for some time. They'll pull back and the market will breath some but if the main lead indicator stays up then this runner has good lungs and strong legs -- and I ain't scared. I bought a bunch today.
Take care,
Eric |
