Good Sunday evening to you, Norma. Our flooring installers dropped the ball, so they still have some details to resolve before they wind everything up on Wednesday. That will be just in time for the kitchen remodeling to start during the week of Memorial Day, an effort that we've been told will last 3 weeks.
Below is my weekly market assessment.
Market Direction Thoughts 5/23/04
Commentary on Previous Reports
During the week I looked at $XCI and noted how good it looked for a bounce, and then recalled my disparaging remarks about it in last week’s report. Huh? OK, so I goofed again, commenting on a dismal daily chart when I thought I was looking at the weekly chart (which was and is positive). Home remodeling is still taking its toll on me, so perhaps I can be forgiven again. $XCI performed slightly above average for the week. My other sector picks, gold and energy, moved in opposite directions, with precious metals among the best performers and energy among the worst. $TYX and $UDX both moved down as expected.
The VIX daily readings were moderately useful in describing what happened during the week, as there was modest reason to expect a reversal upward. Weekly VIX readings were non-committal, and the $SPX moved ended the week only slightly below where it began. So far it seems that my VIX readings have been more accurate than my sector readings.
The prospects of sliding down the stairsteps still exist, but I think that the probability of such a slide is slightly lower now than it was last week.
Commentary for The Week Just Ended
Monday was a gap down day for $COMPQ, and had some evidence of the high-fear day that I’ve been waiting for, but US markets lacked the volume to support the price action. Indian markets, on the other hand, had sufficient volume to support the price action. I am long IBN, and am inclined to add shares of other Indian companies.
$COMPQ breached support at 1875 but bounced up very nicely. Note that $NDX and QQQ did NOT break the March lows, and I think that this is significant. Monday’s $COMPQ failure was not confirmed by Market Weakness indicator, though Market Strength remains abysmal. The slight bounce on the week was due, so I don’t think that one can or should attribute anything particularly positive or negative to anything that happened this week.
$COMPQ daily ORMA is at 26% and rising, with weekly ORMA at 16% and falling. Weekly ORMA is at a level not far above where it bounced in March, so a further rise from here could show a convincing double bottom.
$COMPQ P&F chart is in O’s, having broken a double bottom by one box, but still above the bullish support line and at a level where support has arisen on two previous occasions:
stockcharts.com[PA][D][F1!3!1.5!!2!20]&pref=G
Bud Oscillator forecasts a reversal on the weekly charts, but looks ominously like October of 2000, after which the markets wandered for several weeks before falling precipitously. Daily Bud looks for unimpressive but continued upside.
$SPX daily ORMA is at 22% and rising, with weekly ORMA at 29% and rising. Daily Bud oscillator points to probable unimpressive but continued upside over the short term. Weekly Bud oscillator continues to show some promise of a bounce.
Market weakness indicator again turned up slightly on Friday after falling for most of the week, leading me to temper my optimistic tendencies and other (slightly) bullish-leaning analysis.
P&F chart is in O’s but still on a buy signal:
stockcharts.com[PA][D][F1!3!1.5!!2!20]&pref=G
Commentary and Outlook:
Bear strength (market weakness indicator) just turned up on Friday, presenting a very real risk of further downside. The $SPX built some weak support at 1076, but has no meaningful support until 960. $COMPQ has an island support at 1865 established on Monday, and an abandoned baby support at 1850 from October, but the fear of a declining stairstep pattern is still justifiable. Precious metals outlook is now unclear, with the short term very much in doubt, though long term appears to be more positive. The energy sector looks like some short or medium-term downside is in order, and I prefer oil services to oil or gas producers at this point. The long-term view for energy is still positive, but has recently shown some signs of breaking down, so the sector risk has risen somewhat.
$BPINDX offers the greatest reason for bearishness at this time. This is confirmed by a reversal upward in Market Weakness measure, which occurred at a little higher than 4% weakness and strength reversals from 4-6% tend to be believable, and with Market Strength playing doormat over the last few weeks, this should be disturbing for the bulls.
Asian stocks, and Indian stocks in particular, look solid here. EWJ had an excellent bottoming candle on the weekly charts.
As noted below, some of the most volatile sectors look like they are reversing upward. I consider this to be bullish.
In summary, nothing is clear (muddy water has been the norm of late, and this is frustrating), but I think that whatever happens this week will set an intermediate-term trend in place.
P&F BP’s
BPINDU is in O’s and still on its way down. Of all indicators this probably carries the heaviest weight toward mid-term bearishness:
stockcharts.com[PA][D][F1!3!2.0!!2!20]&pref=G
VIX
- Daily: ORMA is still falling and at fairly high levels, continuing to leave the door open for a market reversal upward. Bud Oscillator is, once again, indeterminate.
- Weekly: ORMA oscillator is at 67% and rising, pointing to a decrease in downside risk. Weekly view of the Bud oscillator calls for a market reversal upward.
Promising/dismal sectors:
$BKX weekly ORMA has reversed upward from extremely low levels. Over the past 11 years this index has never gone appreciably lower when ORMA reverses upward from these levels. $NDX weekly ORMA resembles March 1997, after which the index declined modestly for several weeks before it rose, sputtered, and then did a moon shot. $UDX and $TYX appear to have put in meaningful tops, and this is confirmed by Bud oscillator. PPH and $DRG look weak, and this is confirmed with Bud oscillator. Most tech-related indices are threatening a bounce at the least, and a meaningful rise at the most. RTH continues to be attractive as it has for some time. Weekly Bud oscillator is good for $DJUSCH, $NDT, $NDX, IAH, IIH, HHH, $COMPQ, very positive on $SOX and $XCI, fine for $XAL, good for EWJ, and not bad for most everything else, except as mentioned elsewhere.
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. |
