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Strategies & Market Trends : Trend Setters and Range Riders -- Ignore unavailable to you. Want to Upgrade?

To: Frederick Langford who wrote (13308)	3/2/2002 10:18:46 AM
From: Susan G	Respond to of 26752

Saw that last night Fred! Jorj also posted an interesting one of the bullish percentage levels on the COMPX stockcharts.com[e,a]waclyyay[pb50!b200][vc60][iub14!la12,26,9][J3056158,Y]&pref=G That VIX chart clearly explains why I get SO nervous when it hits the lows. Which is usually when everyone is the most euphoric and thinks I'm nuts <VBG> It can be quite the warning of things to come though... Someone last night predicted it could go below 10 as it did years ago if we keep rallying, but from what I've seen, the lower it goes the harder it seems the eventual fall is. If there is no fear, then everyone is taken by complete surprise at a reversal and heads for the door at once. And from what I saw yesterday, the only fear was felt by the shorts <g> This is some interesting commentary by Larry MAcMillian, form yesterday morning, before the train left. I wonder if yesterday changed his opinion at all... McMillan Market Commentary by Lawrence G. McMillan Mar 01, 2002 08:38 am Stock Market Note: if you are viewing a text version of this report, click on the following link to see the charts: new.optionstrategist.com On the surface -- especially if you are subjected to the nonstop bullish cheerleading on CNBC -- you would think the Dow (and, by inference, other broad-based big-cap indices, such as $SPX and $OEX) was heading to the moon. However, a more circumspect examination shows that none of our major technical indicators is on a buy signal. In fact, one of our oscillators is on the brink of a sell signal. Therefore, despite rising prices over the last week, we cannot be bullish for the intermediate term. The graphs of the equity-only put-call ratios show a rising put-call ratio (Figures 1 and 2). Thus, these remain on sell signals. Now, it is true that they are starting to get rather "high" on their charts especially the normal put call ratio. This is a precursor to a buy signal at some point, but only when they roll over and begin to head downward. There is no "rule" that says they cannot go much higher before that happens. NASDAQ has been performing poorly. While we do not rely on the QQQ weighted put-call ratio as a primary indicator, it is worth noting that its last two signals -- the buy in October and the sell in December -- were excellent. It, too, remains on a sell signal, much as the equity-only ratios above. Market breadth has been fairly strong -- especially on the NYSE. The last two time breadth got extremely strong the market sold off sharply. The $OEX chart (Figure 3) shows where these sell signals took place. Currently, the resistance is more or less at the 570 level on $OEX, not at 600 as it was for the last two sell signals. Nevertheless, the pattern is similar. On the other hand, the $OEX chart shows the multiple support at the 545 level. I had thought that the last penetration below that level would result in a breakdown. It did not. So right now, $OEX and $SPX are in fairly tight trading ranges. The Dow is more positive than any other index and is less representative of the broad market than the other indices currently are. The last major technical indicator that we follow is volatility. The chart of $VIX shows it is at relatively low levels. Usually, buy signals occur when $VIX is at high levels, not low levels. Thus, this indicator cannot be rated as bullish either, unless one thinks that it can fall to much lower levels -- something it has not done for about six years. In summary, while we respect the fact that the market has bounced off support several times, we cannot turn bullish on the broad market in the absence of buy signals from our major technical indicators. If there is truly to be a new bull market from these levels, we will get buy signals from the put-call ratios and other indicators soon enough -- but for now, we remain cautious.

To: Frederick Langford who wrote (13308)	3/2/2002 4:49:03 PM
From: Susan G	Read Replies (4) \| Respond to of 26752

Comments from a newsletter this weekend NASDAQ COMMENTARY The week finished off with a bang on Friday, as the Institute of Supply Management (ISM) Index (formerly National Association of Purchasing Managers Index) showed a jump to 54.7% in February. This marks its first reading over 50% in 19 months, signaling expansion in the manufacturing sector. This sign of economic improvement allowed the Nasdaq Composite to finish the week on a big positive note, gaining 71 points Friday and closing at 1802.75, up 4.5% for the week. Does this news suggest the worst is over for stocks? The next week should be very telling as to whether this move is a breakout or a fakeout. There are a number of concerns for the Nasdaq in particular. First, the Nasdaq Composite has dramatically underperformed the Dow and the S&P indexes in recent weeks, which is typically a bearish situation for the major stock averages going forward. In addition, sentiment is generally too complacent, especially when measured by the CBOE Volatility Index (VIX - 22.13). This measure of volatility hit a 7-month low intraday on Friday, which suggests investors are not expecting major downside risk for the markets. Yet that's usually when you should be concerned, as markets have often topped when the VIX hits the low-20's while typically bottoming when the VIX surges to the 35-40 range in this bear market. The one plus for the Nasdaq is the possibility of a head & shoulders bottom in the Nasdaq Composite. As you see in the chart, the 1700-1750 zone has again held as support the last two weeks, setting up a potential right shoulder that equates to the April 2001 lows. The head is the ultimate low down under 1500. A weekly close under 1700 would invalidate this technical formation, while a breakout over 2100 will ultimately be needed to signal a confirmed uptrend. But in the meantime the head & shoulders setup says the market could be forming a bottom. The OEX and Nasdaq rallies must earn some degree of respect technically, especially with the longer-term bottoming formations on the charts. However, sentiment data is showing too much optimism for this move to have impressive upside potential. Despite the Dow's rally to the highest level of the year, the Nasdaq and S&P indexes have more work to do to get out of this trading range environment. So don't get too caught up in the news headlines about a growing economy again. We expect it will remain a bumpy market environment until we see if there is confirmation of improvement in the first-quarter earnings reports in mid-April.