I wanted to post this sample of the DWA Market Report that is
available through the professional service. Many have asked in the
past what this report is like, so here ya go. This report includes
this weeks indicator updates. Enjoy.
Posted in four parts.
Morning Market Comment
Thursday, September 30, 1999
The-Trader's-Corner
Statistically Significant Technical Breakouts
Stocks Close To A Technical Breakout
Daily Option Ideas
Recommendation Follow Up
Today's Market Comment Will Include the Following:
* Technical Indicator Update
* Weekly Relative Strength Changes
* Sector Bullish Percent Update
INDICATOR OVERVIEW PRIVATE
Status Current Week Ago 4 Weeks Ago
------ ------- -------- -----------
Dow Jones Industrials Sell 10213.50 10524.07 10937.88
Nasdaq Composite Sell 2734.10 2858.16 2750.80
NYSE B.P -- Bear Confirmed O's 36.2 % 41.5 % 44.7 %
Option B.P. - Bear Confirmed O's 36.3 % 43.7 % 46.3 %
Stocks Above Their 10 Wk M.A. O's 20.8 % 23.9 % 26.4 %
Stocks Above Their 30 Wk M.A. O's 28.4 % 33.6 % 40.4 %
High - Low Index O's 11.6 % 26.6 % 38.4 %
TECHNICAL INDICATOR UPDATE
Shown below are the primary technical indicators we follow.
These are updated every week on Thursday. We also comment during
the week if there is a major change in any of the indicators. A
summary of these indicators precedes the individual comments.
SUMMARY: TRYING TIMES ARE NO TIME TO QUIT
TRYING
There is a high probability that your clients did not perform
well this year. With only 34% of the NYSE stocks up, the chances are
that most investors have made little headway this year. This is why
risk management is so important. What if Mr. Jones is down 20% this
year, and next year the market has a real, visible, bear market type of
environment and he is down another 20%? Then, what if the next three
years the market has it's normal average rate of return based on the last
70 years of around 11%? After the first two years Mr. Jones'
$500,000 account is down to $320,000. After three years of a 11%
return Mr. Jones' $500,000 account is back up to $437,650. It will take
Mr. Jones about five years at 11% to recover from two 20% down
years and get back to even. Let's say it's a doctor who has a one
million 401K account which was down to $600,000 and takes five
years to get back to one million. Let's say he is planning to retire in 2
years. Do you think he would like to talk about risk management at
this point in his career or would he rather stay fully invested because he
has been told that his risk is being out of the market, not in the market?
Do you realize the biggest impact I have on investors when we hold a
seminar is this fact -- it never occurred to them that they could lose
40% of their portfolio ---- period. You know the interesting thing is
that could happen while the Dow Jones goes up. Just a couple of
weeks ago, the Dow was up 17% but only 34% of the stocks on the
NYSE were up. Maybe Mr. Jones only has the stocks that go up, but
probability is he doesn't.
The game plan remains the same which is the beauty of this
methodology. We got some calls today from brokers who thought this
was the new dawn. The Dow Jones had rebounded from being down
200 points the previous day and this had to be the new dawn; the new
continuation of the decade long bull market. What stocks do we buy?
What do we jump into? Our answer was nothing. It's time to make up
some lists of stocks you like and would buy if the indicators turned up
but the indicators have not turned up yet. When the short term
indicators turn up we will once again probe for a trend. We will set
stops and follow the stock up with the stops if we are lucky enough to
have stocks that do rise. If they do not and the short term fizzles again,
the stops will take us out. I have had 2-3 of my stops hit of late and
still remain long 1-3 with the stops in. I have no emotion because as
the stops are hit, that position goes to cash. If not, then I have stocks
that are bucking the trend and I want to stay in. Believe me, your
customers want a plan. I got an E-mail from, apparently a client, who
said her broker was using our concepts and wanted to know where she
could get up on it fast. I first off told her to be thankful that she had a
broker who had a plan. Next read my book. But first off, she was in the
right place.
Now, let's take a look at all of the indicators came in this
week.
NYSE BULLISH PERCENT INDEX: 36.2%
Finally, this index breaks into the 30's. This is very good as it
presents an opportunity in the future. Sometime, the NYSE Bullish
Percent just gets close to the 30% level. In 1994 the NYSE Bullish
Percent got down to 32.1%. Now we watch for a reversal up. We will
be aggressive on any reversal up from here. Right now that reversal up
would take place at 44%. Stay tuned.
NYSE Bullish Percent Chart
8 A
7 O X O
O X O X O X
70 O --- X ----------------------------- X 9---O ----X O -------------------
A 3 O 2 X O X O
O X O 2 X O 2 5 6 O 3 5
O X 5 X O 1 O 1 O X O 1 X O X O
O X O X O C 4 X O 8 X O C O X O X O
60 O X 6 X 4 X O X 3 7 O 2 7 X O X O X X O X
O X O X O X C O X O X 0 X 3 5 O C O X 6 X O 1 X
O X 8 X O X O 6 A X 0 X O X O X O 2 O X O X O X O
O X A 1 O B O X O 0 9 O X O X O X O X C X O 5 O
O X X B X 6 X 4 5 0 8 O O O X O X O O X 8
50 B 6 O X O X O X O 9 X 0 X 1 O X 2 X O
1 X O X C X O O X O 4 0 X O X O X O
O 5 8 2 O O X O X 0 O B O 4 O
O 3 O X O 8 B X 8 X O X 9
O X O 1 O X O 3 O X O X O
40 O X O X O X O 2 O X 3 O
2 O X 5 O X O X O
O X C X O X
O C O O X
O X O X
30 O X --------------------------------------------O-X-- X -------------
O X 9 X O X
O X O X O X
O B---> Bull Alert O X A X
O X O X O X
20 9 X O X O
O Lowest level O X
since 1987 ----> O
10
9 9 9 9 9 9 9 9 9 9
0 1 2 3 4 5 6 7 8 9
OVER THE COUNTER BULLISH PERCENT: 40.0%
Not too surprisingly, the OTC Bullish Percent reversed down
this week and into a column of O's after making a lower top. In
general, the large cap technology areas continue to show the best
relative strength overall. Notice in the chart below of the OTC Bullish
Percent that barring very washed out levels of 1998, 1990 and 1987's
market, the OTC Bullish Percent tends to bottom out in the 36% to
38% level. We are now very close to that. For now though, avoid new
commitments and protect what you might still be long if the chart
shows a sell signal or negative relative strength.
OTC Bullish Percent Chart
X
70 ------------------------- X O ---------------------------------------
5 X O
O 8 X O 9 A
O X O X O X O X
2 7 O X 6 7 O X X 1 O
60 O A X A X O X O 3 O X O X O X
O 9 O X O 4 O X O X O X O X 2 7 O
O 8 O 6 O X O X 1 6 O X 5 X C O X O
O 5 C X 5 O 2 O X O C O X O X O X O X O
4 X 4 9 O 4 O X 7 X O X O X O X O X O 5 8
50 O X O X O X B X O X B X 3 X O X 6 X O X O
O O X B X C X O X O O X O X O X O X O X
O X O 2 1 O X O X O 2 O 7 B O X O X O
O 8 C X O X O X C X O X O X O 4 O X O
O X O X O X O 5 O X O X O X 3 X O 9
40 O X O O X O X 1 O O X O X O
5 O X 4 X 8 X O
O O O X
O X
O X
30 -------------------------------------O-X---X---------------------------
O X O X
O X O X
9 X A X
O X O X
20 O X O X
O X O
O X
O X
O X
10 0
1 1 1 1 1 1 1
1 9 9 9 9 9 9
9 9 9 9 9 9 9
3 4 5 6 7 8 9
OPTIONABLE BULLISH PERCENT: 36.3 %
This shorter term indicator took a bit hit on the week falling to
36.3% from the previous week's reading of 43.7%. Like the NYSE
Bullish Percent, the Optionable Bullish Percent is now in the 30% area.
In December 1994 this one fell to only 36% and in July 1996 it only
fell to 36% too. Any reversal up from here would certainly be positive.
This is a shorter term indicator so this will be one of the first to reverse
back up. We will be watching it closely.
PERCENT ABOVE 10 WEEK MOVING AVERAGE: 20.8%
Great buy signals come form the teen's in this short term
indicator and we are close to that level. Like the other short term
indicators, the silver lining to the black cloud is the fact it is now in
oversold territory and any reversal up will be a good buy signal. Right
now the reversal up would take place at 28%.
Percent of Stocks Above Their 10 Week Moving Average
90
RED ZONE
X
X O
X O
80 6 7
X O X X
X O X O X O X
X 8 A O X O X O
X 0 X O 3 X O 5 O
70 --X-0-X-O------------ X O ------------------- X O --- X O -------------
X 0 X O X O X C X O
X O X O X 4 X O X O
X O X O X O B O X O
X O 9 O X O X O X O
60 X O X O X O X O X 6
X O X O X O X O X X O
X O O X 2 O X O X O X O
X O X O X O X O 1 O X O
X O X 1 O X O X X O X O X O
50 X O X O X O X O X X O X O X O X 7
X O X O X O X O X O X O X O O X O
X O X O O X O 5 O X O X O X O
X O X O O X O X O X O X O
X O X O X O 7 O X 2 4 8
40 X O X C O O X O X O X O
5 O X O X O X O X O X O
X O B O X O X X O X X O 3 O
X O X O O 6 O X O X O X O X O
X O X O X O X O X O X O X O X
30 --X --- O ----------------- O X O X O --- X A X---- O --O-X-O----------
X O O X 8 X O X O X O
X O O X O O O
O X X O
O X O X 9
20 O X O X
O X 9 X
GREEN ZONE O O X
O X
O X
10 O
1 1 1
9 9 9
9 9 9
7 8 9
NYSE HIGH-LOW INDEX: 11.6%
This indicator clearly shows that the vast majority of stocks
have been hitting new lows, not new highs. That has been the true
market, not the Dow Jones. Reversals up from below 10% in the past
have been great buy signals for the NYSE High-Low Index. We will
have to see if that 10% level is hit this time. Nonetheless, any reversal
up from such a low level in the NYSE High-Low will be a chance to
enter new positions. For this indicator to reverse up we will be
watching for the number of new lows to dry up. We chart this
indicator everyday and it can be accessed under the symbol HILO in
the Internet system.
The OTC High-Low made a lower top earlier in September at
66%. In July the OTC High-Low hit 88%. Now the chart stands at
42%, not quite down to the oversold level of 30%. In October 1998 the
OTC High-Low hit 2%, In April 1997 it hit 16% and in July 1996 it
bottomed at 16% too. We will keep you abreast of any changes in this
indicator too.
PERCENT OF STOCK ABOVE THEIR 30 WEEK MOVING
AVERAGE - 28.4%
Like most of the other indicators, the Percent of 30 fell again.
This was the third week in a row the Percent of 30 lost ground. As is
the case for many of the other indicators, there is a silver lining. The
Percent of 30 is down at 28.4% and down into the "Green Zone."
The last time the Percent of 30 went below 30% was October of last
year when it hit 12%. Other bottoms include 24% in December 1994
and 12% in October 1990. A reversal up from here would put the
indicator in Bull Alert status.
ADVANCE-DECLINE LINES
There are no signs of strength coming from the Advance-
Decline lines. All three, NYSE, OTC and ASE, have all moved to
new lows on the chart. The first indication of strength would be a
low pole warning but these charts have not even reversed up yet so
they still have a way to go. Short term all three A-D lines are below
levels of ten days ago too. We continue to rate these indicators as
negative.
ADVISORS PRIVATE
This week saw no change in the percent of Bulls. The percent
of Bullish Advisors came in at 42.9% again this week. The percent of
Bearish Advisors saw a rise to 32.8% from 30.4%. This leaves those
expecting a Correction at 24.3%, down from 26.7%. The percent of
Bulls remain at a more reasonable level, down from the troublesome
55-60% territory. We would continue to rate sentiment as neutral to
positive here.
BOND INDICATORS
The Dow Jones 20 Bond Average comes in this week at 99.82,
virtually unchanged from last week's reading of 99.76. During the
week, there was no change on the chart of the DJBB, therefore it
remains in a column of O's and on the timely sell signal that was given
back on February 4th. A buy would signal would now come at 100.80,
where a double top buy signal would occur. Such a move to 100.80
would be a positive sign for the bond market, and would be considered
a buy signal for bonds. But before that, there is now a potential for a
low pole warning at 100.20. We typically like to see the "pole" much
longer in nature to qualify for a potential low pole warning, but should
we see the DJBB rise to 100.20 it would be a low pole warning and
would be the first positive sign for this longer term bond indicator.
Those more intrepid in nature could use that as a sign to start scaling
back into bonds. We ideally prefer to wait for the double top buy
signal at 100.80 before recommending long positions in bonds
wholeheartedly. But till then, we remain bearish with respect to the
longer term prospects for bonds. On the shorter term front, the NYSE
Bond High-Low Index is now at 10.82%, down from last week's
reading of 13.89%. This short term indicator therefore remains on a
buy signal after having reversed up from a low of 4% last week. The
NYSE Bond Advance-Decline line is still below levels of ten days ago,
so that is a short term negative. All in all, we still remain bearish at this
point with respect to bonds.
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