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Strategies & Market Trends : The Rational Analyst -- Ignore unavailable to you. Want to Upgrade?

To: FJV who wrote (789)	4/26/1998 10:27:00 PM
From: HeyRainier	Read Replies (2) \| Respond to of 1720

[ S&P 500: Short Term ] Franco, You brought up some good points in your last post about GTW moving into the S&P 500. I think what will happen is that the correlation coefficient with the S&P 500 will likely move closer to 1.0 now that the link to program trading is established. It is this development that has me concerned over the near term as well, as I have been uneasy all week with the market. Here's what the short-term technical picture looks like: S&P 500 1. Since mid-January of this year, the S&P 500 Index has not traded below its 21 day moving average. It bounced off it successfully on 3/6/98, but as of Friday's close, traded below it. I've seen a crossover from the 21 dma to sometimes lead to a movement to the bottom Bollinger Band, which in the S&P 500's case, would imply a near term risk of about 15 points, to 1093. 2. A short term double-top-like pattern on 4/6 and 4/23... 3. ...which allows us to get a better read on the RSI indicator, which shows a Bearish RSI Divergence. 4. My MACD indicator, which has been an interestingly accurate leading indicator, gave a bearish crossover about two weeks ago. I'm still waiting for the momentum to peak and follow though. 5. Tom DeMark Indicator doesn't like the market either, and thinks it will continue to move lower. (I place much less weight on this, but thought the bearish scenario might as well be fully painted.) ...which is why I have been paring my positions to establish a more defensive posture as time has progressed. While the short-term trend appears to be deteriorating, the positive side is that trend-following indicators continue to remain bullish. Also, I haven't read or heard anything to suggest that a catalyst has been activated that would trigger an imminent fall in tomorrow's markets. Maybe that's why the market continues to be unfathomable by even the most "expert" of experts. Regards, Rainier