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Strategies & Market Trends : Galapagos Islands -- Ignore unavailable to you. Want to Upgrade?

To: Oral Roberts who wrote (51916)	5/3/2004 1:21:14 AM
From: PuddleGlum	Read Replies (1) \| Respond to of 57110

Market Direction Thoughts 5/2/04 Commentary on Previous Reports Last week’s write-up was a pretty mixed bag. My sector calls were generally lame, but since they are based primarily on weekly charts, which attempt to illuminate the next couple of months, I suppose that some more patience is warranted. In fact, with the exception of precious metals (the worst 3-week performer that I follow) my April 10 suggestions of $DRG and energy-related composites outperformed most other composites. My commentary from 3/25/04 was bullish on Japan, but EWJ has slightly underperformed since that time, while JOF has been among the best performing composites. But getting back to last week, the VIX analysis proved to be the correct call, and my assessment that we were at a high-risk point was very timely. I suggested that the market had a small amount of short term upside (I was thinking that Monday and Tuesday might be marginal up days), and that some good shorting opportunities might be available then. However, the Naz was down from the start, and the best shorting opportunity came on Monday. Commentary for The Week Just Ended The $COMPQ was down every day, and broke weak static support at 1975. $SPX was up only one day, and broke minor support at 1117-1120. Just before that support was taken out I observed bear strength to be rising and very near the level at the time that support was established, which gave a low probability that the support would hold. Bear strength is now slightly higher (23%) than it was when the late March lows were established. This should not offer encouragement to bulls. However, Bear strength is approaching extremely high levels, so some sort of bounce may be in order. I did more selling during the week than I had originally planned, and I exposed myself to undue risk with some buying late in the week. $SPX and $COMPQ retreated from lower tops, which is unhealthy. $COMPQ daily ORMA is at 35% and falling, with weekly ORMA at 40% and rising (surprise!). $COMPQ P&F chart is in O’s, and still developing a triangle: stockcharts.com[PA][D][F1!3!1.5!!2!20]&pref=G Bud Oscillator is negative on the weekly charts, but is oversold on the daily charts and will probably bounce on support at 1900. $SPX daily ORMA is at 39% and falling, with weekly ORMA at 32% and stable. Bear strength is high, making it likely that support at 1087 will be tested, and not unlikely that it will be broken. P&F chart remains strong and in X’s (yes, this is a broken record): stockcharts.com[PA][D][F1!3!1.5!!2!20]&pref=G Bud Oscillator daily chart is very similar to $COMPQ, but the weekly chart is actually rather frightening. General: Bear strength is at very high levels, having broken weak support with emphasis. Real bottoms rarely occur when bear strength is so high, which is why I am now concerned that 1087 may be broken. Previously, Bear strength appeared to have peaked at a level just below the prior Bull strength peak, and at a level approximately 1/2 of the bear strength peaks in March, but it did an about-face and went extreme on us. P&F BP’s BPINDU is in O’s and remains amazingly high: stockcharts.com[PA][D][F1!3!2.0!!2!20]&pref=G VIX - Daily: ORMA is rising at 46%, which points to additional market downside. Bud Oscillator is in a range where market bounces usually occur. - Weekly: ORMA oscillator has stabilized at just under 40%, which is neutral or somewhat bearish for the markets. Weekly view of the Bud oscillator calls for more downside action. Promising/dismal sectors: I see little hope from the weekly charts. Interest rates look like they may hold steady or decline slightly. USDollar offers a good shot at falling here. $UTY is one of the better-looking charts, and RKH and RTH may offer worthwhile long positions. Most other charts are dismal. In summary, I see a lot of oversold-ness, offering reasonable hope of a small bounce, but I think that a high-fear day needs to strike before a meaningful rally can begin. The old saw about “Sell in May and go away” may be good advice here. Risk levels aren’t bad, due to support at levels just below Friday’s close, but they aren’t improved by signs of a reversal. Such signs could come by Wednesday, but even then I doubt that they will have much strength. It is very reasonable to stand aside here, or short a bounce. Everything here is my own opinion only, and it’s worth what you paid for it. I’ve been known to be wrong at times. And I’ve been known to be right at least half as often as I’ve been wrong, though I haven’t kept records to support that statement.