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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (34929)	10/27/2001 3:46:25 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 68397

Bernie Schaeffer: Long-Term Moving Averages: Past and Present By Bernie Schaeffer 10/23/2001 11:53 AM ET As consistent readers of SchaeffersResearch.com may know, we typically use the 20-month moving average as a line of demarcation to gauge the transition between "bull market" and "bear market" territory. As all broader-market indices have been sharply declining for well over a year, this focal point has long since been breached, bringing the significance of even longer-term moving averages to light. Below is a table illustrating the various levels of monthly moving averages (M.A.s) I have noticed. As you can see, all three major market indices have violated their 40-month moving averages, and remain below these trendlines, respectively, despite the recent October rally. The INDU and SPX were contained at their 80-month moving averages during their September pullbacks, but the technology-laden COMP continues to trade well below this multi-year trendline. In the past, the .INDU and the SPX were both able to cling to support at their 40-month trendlines during the crash of 1987, while the COMP spent about four months below this trendline. The same was true in 1990, with the COMP trading below its 40-month for about five months. The COMP breached its 80-month moving average for the first time in 1990, only to recover within about three months. The INDU and SPX have now spent three and eight months, respectively, beneath their 40-month moving averages. The COMP has spent 11 non-consecutive months below its 40-month trendline and has been trading on the downside of its 80-month since August. The current behavior of these long-term trendlines is as follows: the .INDU is seeing a flat 40-month moving average, while its 80-month trendline continues to ascend. The SPX is facing a 40-month trendline that is rolling into a decline, although its 80-month moving average continues to rise. As for the COMP, both of its long-term trendlines are relatively flat. It is clear from the behavior of these three key indices relative to their very long-term moving averages that we are in a bear market that is more serious than any since 1973-1974. The technical damage the market has sustained in this bear market has been brutal, despite the recent sharp rally off the bottom. Not only will it take considerable favorable price movement (and most likely considerable time) to undo this damage, but questions must also be raised about the effectiveness of many of the indicators of market bottoms that have "always worked" since the 1980s. These indicators include multiple Fed rate cuts, tax cuts, various "oversold" measures and "high" equity put/call and VIX readings. schaeffersresearch.com

To: Johnny Canuck who wrote (34929)	10/27/2001 3:56:42 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 68397

This commentary indicates another 9 percent to the upside on the SP500, a similar move in the COMPX would give a target of 1940. ************************************ Is CBOE Equity Put/Call Ratio Rolling Over? By Nick Perry (regressionchannels@sir-inc.com) 10/26/2001 3:05 PM ET One of the indicators that I like to keep an eye on is the CBOE equity put/call ratio (EPCR). When the market re-opened in the latter half of September, this indicator registered a string of record-breaking high readings above 1.0. The last single day readings above one were last seen in August and October 1998. In fact, glancing over the data going back to the early 1990s, those are the only days that show a reading greater than 1.0. As you can seen in the chart below, the third week in September saw 4 readings of one or greater. Equity Put/Call Single Day Readings Created with SuperCharts by Omega Research To smooth out the daily fluctuations, you can use a moving average such as a 21-day moving average, which approximates one-month's worth of trading. The theory is that you can use this average to gauge when fear has peak. As this bearish sentiment unwinds, it carries bullish implications. In my opinion, the 21-day moving average of the EPCR appears to have rolled over. Equity Put/Call 21-Day Moving Average Created with SuperCharts by Omega Research This unwinding is occurring at a critical juncture for the S&P 500 (SPX - 1108.62), as it tests its April lows. How low can the 21-day moving average go? As the above chart shows, this average has bottomed near 0.5 twice this year. If this unwinding of sentiment is able to push the SPX through this resistance, I would target a move into the next resistance zone near 1200.