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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: William H Huebl who wrote (42184)	7/20/1999 11:59:00 PM
From: P.Prazeres	Read Replies (2) \| Respond to of 94695

from the StockMotions.com special issue tonight July 20, 1999 Today, the Dow Jones Industrial Average was down 191.23 points to 10,996.45 (-1.71%), the Nasdaq Composite was down 98.11 points to 2732.18(-3.47%). Over the weekend, the SM newsletter mentioned: “The Nasdaq has literally exploded to the upside in recent weeks. A pullback would not be out of the question. More trouble ahead for the net sector.” So far, so good…but where to next? First off, let's talk a bit about where the initial levels of support exist. Of course, I'm talking about the 50 day moving averages. For the Dow, it sits at 10,853.68 or about 1.3% below where it closed today (not much breathing room). The NASDAQ's 50 day moving average is at 2586.54, or about 5.3% below its close today. The Dow's 50 day MA is flattening, the NASDAQ's is still rising. Something happened on the Nasdaq today that doesn't occur very often…and it may signal better times ahead. What was it? The NASDAQ's Arms Index closed at 1.53 today. It has closed at or above 1.53 only occurred 4.3% of the time since 1980. After such an occurrence, the average gain in the Nasdaq looking ahead 125 market days (about 6 months) is 13.59%….if we look out 250 market days (about 1 year) the gain is 24.57%. These gains compare to average forward looking gains of 7.88% and 16.16% for the 125 day and 250 day periods, respectively. In other words, the Nasdaq generally outperforms its overall market average after such occurrences in its closing arms index value. (Basically, the higher the closing value, the better the future performance). Is this a guarantee? Not exactly. 14.5% percent of the 125 day returns turned out to be negative (which means 85.5% were positive) and 7.5% of the 250 day returns were also negative. The worst performing 125 day period occurred after the May 28, 1990 Nasdaq Arms Index close of 1.53. The Nasdaq dropped 23.2% in the following 125 days….but was up 6.6% 250 days after 5/28/90. The best performance occurred after the 1.73 reading on 10/11/90 (a 50.7% gain in the following 125 days). The worst 250-day performance was –27.4% after the 10/13/89 reading of 1.56. The best 250-day performance was 61.8%. On a very short-term basis, when the arms index closes above 1.50, usually there is some sort of bounce just around the corner. The NYSE arms index closed at 1.55, the Nasdaq 100 arms index closed at 2.40 (yesterday it closed at 2.66) and again the Nasdaq arms index closed at 1.53 today. If history is any guide, they are pointing to some sort of bounce in the very near future. What wasn't evident with today's selloff was an explosion of volume. If that were to occur, especially during a downward spike, it would most likely be followed by a mad rush to participate in the bounce. Does it make sense????? I hope so. Have a good night or day…. Paulo stockmotions.com