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 : Tech Stock Options -- Ignore unavailable to you. Want to Upgrade?

To: donald sew who wrote (54620)	10/2/1998 11:06:00 AM
From: Andrew C.R. Biddle	Read Replies (1) \| Respond to of 58727

Don- Excerpt from article on thestreet.com by Helene Meisler (the chartist) about oversold and how any rally between now and next week will fail. >> Overbought and oversold are functions of both price and time. Many times we can work off an overbought or oversold condition by moving sideways, and sometimes it requires much more than that. These days a simple sideways move just doesn't seem to be enough. The market wants price action too, not just time. However, price alone does not move this indicator. The overbought/oversold oscillator I use is a simple 10-day moving average of the net differential on the advance/decline line on the New York Stock Exchange. This typically means that we cannot begin to look for an oversold reading until about 10 days after we've reached our peak overbought. Since our peak overbought reading was reached last week, I do not expect that we will see an oversold reading until sometime next week at the earliest. This is a momentum indicator and therefore we must begin replacing negative readings with lesser negative readings (or positive readings with greater positive readings) in order to declare this market oversold. That would mean that the market is doing better than it was 10 days ago, and is therefore gaining momentum. For example, today we are "dropping" a reading of plus-774 (from 10 days ago). That means the a/d would have to give us a reading of better than plus-774 for this oscillator to turn up. It's possible that we can get a better reading today, but we must also look at the numbers we are dropping going forward, in order to discern a pattern. We will not begin dropping a string of negative numbers until Thursday next week. Therefore it is unlikely we can label this market oversold before then. Any rally between now and then would likely be feeble, as momentum is against it. I have no idea how far down this market can go, although I suspect a test of the August lows is close by. The statistic that will be most telling into a test of those lows will be the number of stocks making 52-week lows. Back in August, when the Dow Jones Industrials bounced off 7379 and the S&P bounced off 939, we had 1,184 stocks make new lows on the NYSE. I believe it is unlikely we will surpass that number on a break of those lows. If we break those lows in the averages in conjunction with a contraction in the number of new lows, then we will have a positive divergence in the market. One of the reasons I believe we will not exceed that extreme number of new lows is yesterday's number of new lows totaled only 310. In a weak market, that statistic will increase well before we test the lows on the averages; instead it is expanding at a rather slow rate into this decline. This gives me confidence when I say I expect we will find positive divergences at the end of this decline. << Full article and chart at: thestreet.com. Andrew