Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Johnny Canuck who wrote (37564)	7/11/2002 12:59:12 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 68329

Bernie Schaffer: Drawing Even More Lines in the Bear Market Sand ... 7/8/2002 12:34:16 PM Technical analysts know that a moving average is one of the most widely used technical analysis tools in all of trading. It's a workhorse for many in the industry. Indeed, moving averages are used to identify the market's trend to establish positions in the direction of the trend. A moving average is calculated by taking the sum of all the closes divided by the time frame in which the prices were taken. For example, adding the closing prices for the Dow Jones Industrial Average (.INDU - 9274.30) over the last 10 trading days and dividing these by 10 would result in the 10-day moving average for the index. While many technical analysts look at moving averages of short duration, we at Schaeffer's Investment Research have been pioneering in the study of very long-term moving averages as delineators of long-term bullish and bearish trends. As many of you may recall, my bearish call on the S&P in February 2001 was based on the violation of its 40-month moving average. Recently, Joe Sunderman observed that the length of time that the S&P has now spent below its 40-month moving average exceeds that of all bear markets over the past 30-years except for 1974-1975. And I predicted on several occasions (May 31, May 20, May 10), earlier this year that the "compression" of the S&P 500 Index (SPX - 977.60) between its declining 10-month and rising 80-month moving averages would be resolved by a sharp break to the downside. These days, with so many stocks, sectors and indices so heavily beaten down, it becomes important to look for additional benchmarks that could define support and resistance. Today I'd like to look at some charts and pay particular attention to the 160-month moving average. Yes, 160-month. This equates to over 13 years of market activity. Not only have some equities and indices violated this latest line in the sand, but some are finding at least temporary support at their 160-month moving averages. First, the technology laden and quite beleaguered Nasdaq Composite (COMP - 1418.70). Having already breached its 40-month trendline by a considerable margin, the index is now perched on its 160-month trendline. The S&P 500 Index (SPX - 977.60) is faring a tad better, currently perched over 20 percent above this long-term threshold. The broad-based index dropped below its aforementioned 80-month moving average at the end of May. The 160-month is currently at about 775, just shy of the 776.56, which defines half of the index's all-time high. Thus, the 775-780 area seems like a logical target for the next leg down. The PHLX Gold and Silver Index (XAU - 71.82) is actually trading below its 160-month, at which it was rejected in both May and June. The precious-metal index is perched above its 40-month trendline, which resides around the 60 mark. Now moving on to some technology stocks, some of which are hanging by a thread to their respective 160-month moving averages and a couple who haven't been quite as "fortunate." Oracle (ORCL: sentiment, chart, options) and Intel (INTC: sentiment, chart, options) are perched just above this trendline, as is Micron Technology (MU: sentiment, chart, options) . Having breached this trendline are both Sun Microsystems (SUNW: sentiment, chart, options) and Nortel Networks (NT: sentiment, chart, options) . Lastly, the fates of some "safe haven" blue-chip names. AT&T (T: sentiment, chart, options) and airline company AMR Corp. (AMR: sentiment, chart, options) have fallen below their 160-month trendlines. Financial heavyweights J.P. Morgan (JPM: sentiment, chart, options) Chase and Charles Schwab (SCH: sentiment, chart, options) are currently hovering right above this technical level. Also perched on its respective 160-month is Ford Motor (F: sentiment, chart, options) . Coca-Cola (KO: sentiment, chart, options) is trading well above this trendline. Additionally, KO is one of the few and the proud to have traveled above its 40-month trendline. - Bernie Schaeffer