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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Teresa Lo who wrote (2101)	7/27/1999 4:34:00 AM
From: Teresa Lo	Read Replies (1) \| Respond to of 18137

Morning Market SnapShot for Tuesday, July 27, 1999 Focus on the Top S&P 500 Index Components Microsoft (MSFT) In our July 20 column we said, “Microsoft closed at a new all-time high last Friday and made a new intraday high yesterday before reversing. On the weekly chart, MSFT is in a test of top position. Somewhat worrisome is the contracting volume over the past six months. This is also the first new high in 1999 where the situation exists where a pull back into the old high of $95 5/8 may turn into a signal of a failed breakout on both the weekly and the monthly charts. For now, the 20-day exponential moving average is around $91.50, so any pull back into the old high will first test this area for support, and until this happens, MSFT is still in an uptrend.” MSFT broke its 20-day EMA last week, confirming our observation that the move to new highs was indeed a test of top and not a new breakout. Note the lack of volume on the run up to test the old high. On the weekly chart, MSFT drew a Japanese candlestick named “bearish engulfing”, confirming that sellers are in control. Note large volume on the move down confirms the failure to breakout. Since 1990, there have been less than a handful of instances where MSFT failed to move higher on the weekly chart on a test of top. The minimum target for this move is to test the 20-week EMA at $84. The second target is the June low of $75.50. The third target is the 50-week moving average of $71.50. GE is testing support at the 20-day EMA, after being unable to break out on a test of top. IBM has broken the uptrend line on the daily chart through the 20-day EMA and is now testing the 50-day EMA. Wal-Mart has been unable to challenge the April high and is moving sideways on contracting volume. AT & T has been stuck inside a trading range for all of 1999, unable to move up. Cisco appeared to be making a consolidation on contracting volume after the new high was made, but the pattern failed – which in itself is a powerful message – and broke down under the 20-day EMA. $60 is the nearest support. After a great run, Lucent made a high on extreme volume signaling a buying climax, forming a Japanese candlestick named “spinning top” at the high. Note the high was made at a nice round number at $80, similar to MSFT making an all-time intraday high at $100. Merck is making a very large head and shoulders pattern on the weekly chart, with the neckline nearby at $65. With the leading stocks looking unattractive on the charts, it is difficult to purchase them on a technical basis. The Internet sector, as seen on the CBOE Internet Index, is just as difficult at the moment, having formed a large head and shoulders top. 450 represents nearby support and if it is broken, then a test of the neckline will be next. The S&P 500 Index is trading near critical short-term support at the 50-day moving average of 1344. New 52-week NYSE lows now out number new highs by 5:1. The 10-day MA of the net high/low differential diverged from the market when it did not make a new high while the S&P made a new high. This was our first hint that all was not well, representing a serious deterioration over the past week reminiscent of July 1998. We wrote last week to warn our readers to be careful, especially in the face of the CBOE market volatility index, the VIX, being at a low for 1999, indicated extreme complacency. Investors are now on red alert, acting very cautious going forward, and with the U.S. dollars weakening, interest rates will have extra upward pressure. FOMC Chairman Greenspan's testimony last week seemed to serve as a wake up call for Goldilocks. Charts specific to these comments have been posted to intelligentspeculator.com