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

To: PuddleGlum who wrote (52349)	6/14/2004 1:00:31 AM
From: PuddleGlum	Read Replies (2) \| Respond to of 57110

Market Direction Thoughts 6/13/04 Commentary on Previous Reports My last report was slightly bearish, with daily VIX indicators offering some encouragement for bulls, while weekly VIX indicators were indeterminate. Market strength and weakness indicators failed to shed much light on matters, but when combined with $SPX and $COMPQ ORMA readings made for a bearish scenario. However, $SPX and $COMPQ rose approximately 2% each. Due to time constraints, there were no specific sector picks last week, but I was somewhat bearish on precious metals. Both $HUI and $XAU complied by falling more than 2%. I thought that a better buying opportunity would appear in Asian markets, but EWJ and JOF posted excellent returns during the week of 5% and 12%. The energy sectors rose modestly, with energy services outperforming the general market, so they did not disappoint. Summary of The Week Just Ended Both $SPX and $COMPQ busted through minor resistance levels, with $COMPQ closing just barely below former resistance of 2000, and $SPX closing slightly above the former resistance level of 1125. $COMPQ daily ORMA is at 88% and rising. Weekly ORMA is at 28% and rising. The double bottom on the weekly chart appears to be bearing fruit. $COMPQ P&F chart remains in X’s and above the bullish support line, so it still looks “safe”: stockcharts.com[PA][D][F1!3!1.5!!2!20]&pref=G Daily Bud Oscillator is again indeterminate. Weekly Bud Oscillator leans toward further upside, but has been more reactive than predictive of late (this also applies to $SPX Bud oscillator). $SPX daily ORMA is at 92% and rising, with weekly ORMA at 46% and rising. Daily Bud oscillator is in an area where the probability of downside is greater than upside. Weekly Bud oscillator now gives no indication that downside is imminent, but it, too, is in a region where one should be careful of a reversal downward. P&F chart reversed into X’s and is still on a buy signal: stockcharts.com[PA][D][F1!3!1.5!!2!20]&pref=G Commentary and Outlook: Market weakness indicator has risen over the last week. Market Strength is bouncing around at low levels, but is still higher than Market Weakness. Market strength is not supportive of market attempts to break through resistance levels, but neither is Market Weakness supportive of attempts to violate support. Friday’s Fed governor statement about rising interest rates is probably already factored into the market, but could be used to bring about a modest downtrend. With hard resistance so near, and near support fairly weak, I think that the odds are not generally favorable to long positions. Short positions are reasonable, but sidelines look good here. This is options expiration week, so strange behavior shouldn’t be surprising, and extremes in either direction can be faded. My indicators do not clash with Zeev’s at this point, but I think we go lower before we go higher. $COMPQ has modest support at 1960 and stronger support at 1875, with resistance at 2050-2060 and again at 2075. $SPX has support at 1115 and again at 1076-1080, with resistance at 1145-1150, and again at 1160. Precious metals are trying to look bullish on the daily charts in spite of recent retreats, but based on weekly charts I expect a move toward the May lows. Energy-related sectors remain strong. Asian stocks have bounced well since the May lows, but I would still wait to buy on weakness. P&F BP’s $BPINDU is in Bear Confirmed status still on its way down. Note that for the BP’s I have reverted to standard P&F charts while I continue to use percentage charts for indices and individual securities. stockcharts.com[PA][D][F1!3!!!2!20]&pref=G $BPNDX is in Bull Alert status: stockcharts.com[PA][D][F1!3!!!2!20]&pref=G VIX - Daily: ORMA remains oversold (market overbought), but it still looks weak, which would allow the market to rise. Bud Oscillator suggests that the VIX should rise from here. - Weekly: ORMA oscillator continues to decline, and can easily decline further (meaning market can rise). Weekly view of the Bud oscillator is approaching oversold territory, but hasn’t telegraphed a reversal and has room to continue its decline (suggesting limited upside for the markets). Writing OTM covered calls on long positions might be a good strategy here. Promising/dismal sectors: $BTK and BBH are due for a bounce after getting hammered during the week. However, $BTK has actually completed a head and shoulders pattern, so should be handled with care. $OSX looks good to resume the uptrend. $UDX put in a good bottom at the beginning of this year, and looks poised to resume an uptrend after its recent swoon. Software and Telecom have very decent prospects for further upward motion. Definitions ORMA – A home-grown oscillator. It’s similar to %D of a 14, 3, 5 stochastic indicator. It’s more responsive than predictive, faster than %D yet with fewer false signals. Bud oscillator – A home-brewed oscillator that often has some predictive value. Market Strength/Bull Strength – A measure of bullish influence in the market, akin to new highs. Market Weakness/Bear Strength – A measure of bearish influence in the market, akin to new lows. Usually, but not always, moves inversely to Market Strength. Short Term: a few days or a week. Medium Term: several weeks. Long Term: several months. Disclaimer 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.