From: donald sew Saturday, Sep 1, 2001 10:03 AM
SEPT 1 INDEX UPDATE
------------------------
Short-term technical readings:
DOW - OVERSOLD REGION
SPX - OVERSOLD REGION
OEX - OVERSOLD REGION
NAZ - OVERSOLD REGION
NDX - OVERSOLD REGION
USD - LOWER MIDRANGE, DOJI HIGH still holding, RECTANGLE forming
NAZ NET NEW HIGHs-LOWs = NEGATIVE 67
The were signs today that a small rally may have started, but of course we need to see follow thru. However, I never got CLASS 1 BUY SIGNALS which is giving me the hint that if the market continues to move up, it will only be an UP-OSCILLATION within the DOWNSWING that started MONDAY(AUG 27). In a downtrend it is most common and statistically viable to get a CLASS 1 BUY signal before a reversal starts. So if the market does move up on TUE/WED, it could just be the effects of the END-of-MONTH RALLY. Since I mentioned END-of-MONTH RALLY, I don't want to give the impression that it will be much of a rally, just something small. Don't forget we got the 3-BLACK CROWS in various indicies, not just one.
As mentioned often, it is not uncommon that after the 3rd day of the 3-BLACK CROWs, there is some sort of a bounce. At most, these types of bounces should not exceed the 1/2 point of the 3-BLACK CROWs. In the case of the SPX that 1/2 way point is around 1160. Im not saying that it will get that high, just saying that should be the maximum for this type of rally, if it gets that high. Thereafter the selling should resume and could intensify. The reliability of the 3-BLACK CROWs is very high. Since the downturn in the market started last year, I believe there has been approximately 15-20 3-CROWs in the various major indices and none have failed. Having said that, a pattern of 15-20 is still NOT statistically viable, although its a heck of alot better than the 1-to-1 or 1-to-2 or 1-to-3 comparisions so many rely on. As a rule of thumb, to be statistically viable, a certain pattern should be repeated a minimum of 30 times, before one can appropiately apply a probability level. Regardless, a pattern that hasn't been wrong for 15-20 straight occurances still has merit and should be mentioned. Some may feel that I make too much of the 3-BLACK CROWs, but if you found a pattern that worked 15-20 times straight, wouldn't you. I've seen people raise there hands yelling strong bullish or bearish comments based on a pattern that has repeated itself 2 or 3 times. Sorry but 10-15 occurances, is a heck of alot better than 2 or 3.
My last comment on the 3-BLACK CROWs, which is subjective and not backed by statistics, is that if a 3-CROWs pattern was to FAIL, that could be a significant hint that the trend may be changing to the upside. To explain, the 3-BLACK CROWs(negative) and the 3-WHITE SOLDIERS(positive) are the same type of patterns, both with very high levels of reliability - the difference is that they are pointing in opposite directions. Since the selloff started last year, there has been a few 3-WHITE SOLDIERs and a few of them have failed. My subjective conclusion is that the reliability of these 2 patterns will increase if it is in the same direction of the trend - so a 3-WHITE SOLDIERs would become more reliable than the 3-CROWs in an uptrend. This also leads to the conclusion that if the 3-CROWs fails now, especially since there were 4 of them(DOW/SPX/OEX/BANK), that could either be a strong hint of an important change in trend/bottom.
Here are issues I consider KEY for market direction:
1) Will the NAZ NET NEW HIGHs-LOWs improve or continue to deteriorate.
The NAZ HI-LOs is still significantly below that BEARISH RISING WEDGE
2) How will MSFT perform. If it continues down more, that aint good for the NAZ/NDX or DOW.
3) Can the forthcoming short-term rally produce a HIGHER HIGH. If not, then the DOWNTREND is still intacted.
There are not many signs of strength, but here's a few:
1) 2 weeks ago the BTK formed a "3-WHITE SOLDIERS" and for now it is still intact. As mentioned, I won't ignore that 3-WHITE SOLDIERS, but I won't ignore that it is occuring in a downtrend which could reduce its reliability. For now its still holding
2) Its pushing it a little - but the SOX did not set a LOWER LOW yet. Lets not call it a sign of strength, but a hint of less weakness.
Just not alot of positives.
As to how low will the NAZ/NDX go. Yes I do have an opinion, but since I consider all strong calls to have lower probability, I do my best to stay away from them and they do not effect my short-term swing trading. For example I did go long on a small position per a CLASS 1 BUY signal on a stock, which ain't doing that great right now, but not worrying either.
Here's an interesting thought. During the STRONG BULL RUN int 1999 I recall getting about 7 NEGATED CLASS 1 SELL SIGNALs. Of the 7, 3 of them resulted in 1000+ point moves(one in the DOW and two in the NAZ). What is interesting is that I have not yet gotten a NEGATED CLASS 1 BUY SIGNAL in this strong downtrend(to the best of my recall). I'm not predicting, but if that was to occur I would be real bearish.
As for the short-term(next week), I really not too sure since I never did get a CLASS 1 BUY, especially since the market is downtrending. So it could head back down to form the CLASS 1 BUY or move up some more to at least the midrange on my short-term technicals since I did get CLASS 2 BUYs. And maybe the END-of-MONTH EFFECTs, may help the market a little.
Have a great 4th of JULY. Just kidding, Im not that retarted yet gggggggggg |
