^SPX|
For Hallowe'en, Wednesday, October 31, 2001 © Bob Carver |
^SPX
· ^IXQ
· ^NDX
· ^DJI
· ^MID
· ^OEX
· ^NYA
· ^VLE
· ^RUT
· ^SML
· ^CRB
· ^XAU
· ^BTK
· ^TYX
[Go back]Stocks: Hallowe'en on Wall Street
Here we are again: the market is plunging, it's a Full Hallowe'en Moon and we have, naturally, a Time Ratio Low due. With the market oversold, we suspect that a bounce is due, but we don't see any sign — yet — that a bottom is nigh.Yes, the oscillator indicators are diverging bullishly, but that's no sure buy signal. We'd like to see some bullish divergence on our Intraday Market Clues Money Flow
The real wild card in all this is what kind of terrorist attack is going to happen today (or Thursday, or Friday)? If Osama is following the technical indicators, this is exactly the right timeframe to launch an attack: the market is under pressure, just like it was on 9/11. And, apparently, Tom Ridge thinks the threat is credible enough to issue a warning to be on the alert. If, like 9/11, the terrorists do set off a bomb or bombs, this downcycle could rapidly retest the September 21 low. Thus, keeping a high cash level here seems the most prudent policy. We certainly hope the enhanced levels of security and awareness on the part of all Americans and our friends around the world pay off (we'll never know, probably, if they do and a planned attack is thwarted).
|
For Tuesday, October 30, 2001 © Bob Carver |
| +78.59% vs NASDAQ | Dow Industrials | Small Caps | NASDAQ |
| +40.74% vs S&P 500 | Bull Market | Bull Market | Bull Market |
^SPX
· ^IXQ
· ^NDX
· ^DJI
· ^MID
· ^OEX
· ^NYA
· ^VLE
· ^RUT
· ^SML
· ^CRB
· ^XAU
· ^BTK
· ^TYX
Stocks: Profit-Taking
The market plunged Monday right on cue while investor sentiment remained even-keel. ``What? Me worry?'' seemed to be the attitude toward the market. Perhaps investors have gotten complacent; after all, only last week the market sold off a similar amount and then came bouncing right back. Although this could happen this week, we think that to be an unlikely occurence. In fact, if we interpret this leg down as the ``second shoe to drop'' following the prior leg down, we could see that 50% (or greater) retracement of the initial rally which started on 9/21.Money Flow was weak on the selloff: the big money has done their buying, it seems.
A strong sign of complacency seems to be the order of the day. ``After all,'' most investors seem to be saying, ``we've seen just about the worst run of news we could have ever imagined and the market is bouncing right back!'' Perhaps so. In fact, it may be that the incessant pumping on the money supply the Fed has been doing all year long is finally going to put a bottom into this economic depression and soon. Still, we think investors may be a bit too confident at this stage ... and ``cruisin' for a bruisin'.'' We have a time cycle and time ratio low due this week. Let's see just how much damage a little correction can do to the sentiment numbers and just how much money the ``big guys'' are willing to put up to stop the decline.
One other note: we're beginning the Monthly Buying Spree, for what it's worth. With the market up sharply going into this monthly seasonal, the effect is likely to be quite muted this time around.
ElliottWave.com
All you Elliott Wave afficionados can sample the analysis of Bob Prechter and crew free for a whole week starting on, naturally, Hallowe'en. Use the link at the top of the page to register if you're interested.
| Portfolio Performance:[chart] |
For Monday, October 29, 2001 © Bob Carver |
| +78.59% vs NASDAQ | Dow Industrials | Small Caps | NASDAQ |
| +40.74% vs S&P 500 | Bull Market | Bull Market | Bull Market |
^SPX
· ^IXQ
· ^NDX
· ^DJI
· ^MID
· ^OEX
· ^NYA
· ^VLE
· ^RUT
· ^SML
· ^CRB
· ^XAU
· ^BTK
· ^TYX
Stocks: Bull Market Rise Confounds Investors
Last week's rise in the market confounded many investors, but the long term picture painted by our Money Flow indicator tells us we are at the beginning of a strong bull market (see S&P 500 Money Flow Chart for a graphic showing how the Money Flow Line has turned sharply higher and moved to a new, all-time high). This is the most bullish divergence we have ever witnessed on this Money Flow indicator since we started keeping this data in 1988. It's a clear sign that a very powerful bull market is now underway.This very bullish technical indicator of strength is confirmed by similar data from Value Line's Asset Allocation Model, which is now giving its most bullish signal ever as reported in their October 5 notice to subscribers and in this week's Barron's. That model, based upon interest rates, dividend yields, relative market valuation, bank free reserves, and others, has been backtested to 1968. That it's giving its most positive signal ever right now is a powerful confirming factor that a new bull market has started.
According to the Value Line model, the S&P 500 Index should soar 36% over the next six months. And, according to their model, the best performing sectors should be high techs, blue chips, small caps and growth stocks. Poor performing sectors will include defensive stocks like food, drugs and utilities, according to the Value Line model.
Psychologically, this market is climbing a big wall of worry, another typical characteristic of a long-lasting and powerful bull market. Everyone seems to be concentrating on extraneous factors, such as price-earnings ratios. Price-earnings ratios have a very tenuous connection to the real market in the best of times, but very little relationship at the beginning of a bull market. Typically, bull markets start when stocks are at very high price-earnings ratios. It's not hard to explain this surprising fact: at the economic bottom, company earnings are at their worst, so the denominator of the price-earnings ratio is as low as it will get, making the ratio relatively very high compared to price, the numerator of the ratio. For instance, a company may be operating at a loss at the bottom of the economic depression, making its price-earnings ratio infinite (a zero denominator mathematically results in an infinitely-high ratio). It's at the top of the economic cycle when you tend to see relatively low price-earnings ratios, since at the top earnings are at their highest, lowering the overall ratio. This focus on, or should we say, obsession with, high price-earnings ratios right now is more of an indication of overly-bearish sentiment than anything predictive of what the market will do in the months ahead. According to fundamentalists, one should buy stocks only when price-earnings ratios are lowest; in other words, at the top of the economic cycle, when earnings are making their highs. Because the market discounts future earnings, price-earnings ratios tend to decline at the top of the cycle due to declining stock prices and rising current earnings. Thus, the price-earnings ratio is a very weak and noisy indicator, composed as it is of current stock price divided by trailing earnings.
We think that's wrong-headed thinking, of course, and prefer technical indicators, both coincident and forcast varieties. Coincident indicators are preferred because they tell you what the market is doing right now, not what it is supposed to be doing. The Money Flow Line is a coincident indicator because it measures the current degree of money flowing into or out of stocks.
Another coincident indicator is sentiment, which tries to measure the crowd's emotional level. When the vast majority of investors are bearish, they sell their stocks and build up cash reserves because they believe the market cannot rise. When many have sold, there are few left to sell. In the absence of selling pressure, the early buyers become a dominant force in the market, pushing prices up that ``wall of worry.'' That appears to be what is happening now. Despite some nice moves higher this past week, our Intraday Dollar-Weighted OEX Call-Put Sentiment Ratio
While the long term is positive, the short term is not. The market is overbought, yet diverging bearishly (higher highs in price, lower highs on the oscillators). The NASDAQ-100 Index, once again fulfilling its role as a leading indicator, declined Friday while the Dow Industrials continued higher. Time Ratios have been forecasting a low for Wednesday (October 31) and time cycles have been projecting a low in that same time frame. The Dow Industrials are vulnerable here as they have just returned to the vicinity of the gap formed on September 11. All of the blue chip indices are within hailing distance of overhead trendline resistance which can be readily seen in the daily charts. Thus, our caution here with a dip more likely than a continuation of the rally.
We'll be looking for opportunities to buy the dips, however, since our call is for a rising long term trend. If the October 31 turning point ends up being a high, we will have a cycle inversion, a development which would favor an outstanding buying opportunity ahead. As you may recall, the long term resistance trendlines call for a low in late November or early December, and that time frame may present the next best opportunity to buy for the long term.
Australian All Ordinaries:
Near term bullish behavior: the index jumped above resistance. That resistance line was the former support line in the long term bull market, of course. However, the index is diverging bearishly on the oscillator (as are the US indices), which argues for a dip to refresh the sideline cash coffers.Australia Business News
Yahoo! Full Coverage of the Australian Economy
London Financial-Times 100:
The London market has been unable to substantially break above the long term resistance line and, like the other indices, is diverging bearishly. A dip is more likely directly ahead.U.S. Dollar Index:
Approaching overhead resistance now. Resistance at 116.59, the previous reaction high, will dovetail with the significant red resistance line on Wednesday, Hallowe'en. It looks like this bounce should be over this week. If that's the case, the next down in the US$ could be quite severe and lead to foreign selling in the US stock and bond markets.Australian Dollar:
Very likely stuck in a trading range for the next nine months. On the positive, the A$ is holding at relatively low levels vs. the US$, giving Australian exporters an advantage in competing with US exporters.Canadian Dollar:
Trading range likely for well more than the next year, barring a technical breakout of the current range.Bonds / Interest Rates:
Extraordinary weakness in economic news sent the long bond to a new relative high, while the 10-year Treasury Note [December 2001 10-Yr T-Note FuturesStrength in the US$ has been supportive for bonds. However, there is a Time Ratio Low due in the 30-year bond interest rate series by the end of this week. Most technical signs are in agreement: higher interest rates and lower bond prices are much more likely on the long term time horizon.
(http://www.marketclues.net/cgi-bin/myclues?chart=/:/indices/d/_tnx.4903.html): 10-Year Treasury Note Rates
Bond Page at Open Directory Project (http://dmoz.org/Business/Investing/Stocks_and_Bonds/Bonds/)
Michelle Girard's Treasury Market Update (http://www.prusec.com/market_news/treasury.htm)
Sectors and Individual Stocks (Subscribers Only)
For tables ranking sectors and individual stocks, and links to charts of 3500 individual stocks and sectors, please visit your very own MyClues Home PageFor a 1-2 month free trial subscription, click here.
Commodities (Subscribers Only)
Commodity News Summary (http://www.ctrader.net/)
For complete charts of commodities, please visit your very own MyClues Home Page
- Daily Indices, charts of sector and popular stock and bond market indices on a daily basis
- Quarter-Hourly Indices, charts of selected indices on a 15-minute basis
- Daily Futures, charts of futures markets on a daily basis
- Quarter-Hourly Futures, charts of those same futures markets on a 15-minute basis
For a 1-2 month free trial subscription, click here.
CRB Index:
Extremely bullish divergence in the CRB chart bodes well for commodity prices from here. We are likely to see, at the very least, an oversold rally in commodities from here. That would coincide with a bond market price decline, as well as a decline in the US$.
Format for printing. [Go back]
|
For Friday, October 26, 2001 © Bob Carver |
^SPX
· ^IXQ
· ^NDX
· ^DJI
· ^MID
· ^OEX
· ^NYA
· ^VLE
· ^RUT
· ^SML
· ^CRB
· ^XAU
· ^BTK
· ^TYX
Stocks: Trading Range
The trading range this market is in was tested on the upside as well as the downside Thursday. The market's initial reaction to incredibly weak news on production was to selloff. After finding a lack of sellers at the lows, a reversal to the upside fed on short covering to end near the top of range. OEX traders were heading the wrong way, having pumped only 38¢ into calls for every dollar of puts.Once again, high tech led the way higher. This consistent outperformance by tech is a characteristic of early stages in a bull market. As you can see from the Relative Strength charts (see CHARTS & RESEARCH->Daily Indices->R section for Relative Strength charts which compare various indices' strength, especially the one comparing the NASDAQ-100 Index to the Value Line Index), the big change which has occured over the weeks since September 11th is reflected in the turn up in the tech sector, and the falloff in the broad market. While some of this may be seasonal in nature, we think it represents the confirmation that the new bull market is alive and kicking. Note also the Relative Strength of the Value Line versus the S&P 500: the bear market just past consistently saw the broad market Value Line regaining lost ground against the S&Ps. Recent action (post-9/11) indicates we may be in a traditional environment where the beaten-down large companies are regaining an advantage.
Another interesting factor is that the XAU is beginning to find some support. Is the long bear market (20 years) in gold stocks finally at an end? It certainly looks promising, but time will tell. It's important for the XAU to hold above the uptrend polytrendline shown in green.
Despite the bullish implications of current action, the market is vulnerable from a Money Flow standpoint, as well as from tax-related selling pressure. We would prefer to buy on dips during this seasonally weak period. With only 10% of all stocks in the Window List top-ranked on our technical ranking system versus 59% at the bottom of the barrel, there's good reason to be cautious.
Format for printing. [Go back]
|
For Thursday, October 25, 2001 © Bob Carver |
Stocks:
High-tech took center stage Wednesday as the Networking, Semiconductor, Software and Internet stocks continued their recovery. The NASDAQ-100 almost tagged last week's high. However, the advance was narrow: the broad market underperformed. And, the oscillators diverged bearishly against price, which, at the very least, tells us that this market is in need of more correction before mounting another leg up.Money Flow in the broad market also diverged bearishly (see the quarter-hourly Value Line chart for a visual on that), although the S&P 500 Money Flow figures are more bullish, probably due to the large weighting of high-tech in the latter index. The only ingredient lacking in this picture is excessively bullish sentiment, which remains neutral.
Yes, it's a market to try many investors' patience. It's also very typical for a market which is building a base. As long as the correction remains moderate — less than about a halfway retracement back to the last major low — our call that we're in the early stages of a bull market remains the most viable explanation. It's probably a good idea for investor sentiment to dip into the overly bearish zone on the next dip to keep the fear factor high.
On a longer term basis, the bullishness we've been seeing is probably justified. ``Buy the dips'' is definitely the best investment advice right now. And, a dip into next week is highly likely.
Firewall Problems Solved
Some people have reported that our website isn't accessible from behind some blocking firewalls. Consequently, we've rerouted things to use the standard web port. You can still use the old URLs, however; but, if you're behind a firewall and having problems, try removing the ":777" from the URL. If you're not behind a blocking firewall, you shouldn't see any difference and you can use the old URL. Either way, the ``last mile'' to the website will continue to be accessible over two different Internet paths. Path #1 will be tried for 2 seconds; if it doesn't connect, path #2 will be tried automatically.
Format for printing. [Go back]
|
For Wednesday, October 24, 2001 © Bob Carver |
Stocks:
The market ran into resistance after most indices retraced more than 62% of last week's declines. The fact that more than 62% was retraced, but less than 100% so far, leads us to opine that we may very well be looking at an Elliott contracting triangle pattern or, at the very least, some kind of short term, fairly narrow trading range pattern.Some of the reasons we think that not too unlikely are:
- The sentiment on our Intraday Dollar-Weighted OEX Call-Put Sentiment Ratio
- Intraday Market Clues Money Flow
- The market is close to overhead trendline resistance lines on a long term basis (see the daily index charts, such as the S&P 500 Index). That argues in favor of some backing and filling action.
- The ferocity of this bear market has left many stocks undervalued, so there are bargain hunters out there to scoop them up on dips.
- The Elliott progressions on the longer term say we should be in a sideways trading range. And on the shorter term, the argument in favor of a trading range has some persuasiveness: after the big oversold bounce from the lows of September 21, the market could correct by moving sideways, prior to another big surge up.
Quite a mixed bag, eh? That in itself is an argument in favor of some kind of trading range, both on the short term and on the long term. We'll be watching for the market to tip its hand: a breakout or breakdown. Until then, our working hypothesis is that this is a good ol'-fashioned trading range, designed by the market to frustrate the maximum number of traders.
Format for printing. [Go back]
|
For Tuesday, October 23, 2001 © Bob Carver |
Stocks:
The blue chips moved up as the bargain hunters bid stocks up. The rally was good in that it saw the blue chip indices (Dow, S&Ps and Cubes) retrace more than 62% of their prior decline, which is short term bullish. However, the broad market Value Line Index lagged. And, we haven't seen the kind of positive Money Flow statistics (bullish divergence) evident in the runup to last week's high. That note of caution warns that the market is skating on thin ice. Skating, yes, for now, but the danger is still there, just under the surface.Further anthrax news (Postal worker infections) didn't seem to have too much effect on the market Monday. That's either because the market really wasn't reacting to anthrax news last week as so many commentators were saying, or the market doesn't really care whether Postal workers get sick. We'd hope it's the former. We had contended that the market was ignoring the anthrax hysteria last week, by the way, and Monday's action proves that it was just a smokescreen.
The near term action says the market's plunge last week may have been a bit premature. At least, that's the feeling here. Despite that, we took the opportunity Monday afternoon and continued to sell the weaker shares in our Model Portfolio. We're looking forward to an opportunity to put that cash that's now on the sidelines back into the market on the next dip.
We mentioned Dow 7700 as a possibility in the last update, but didn't say exactly what indicators pointed to that as a risk factor. We say, ``risk factor,'' because that's exactly what it is. It's not a forcast that the Dow will actually fall that far. You always should be mindful of the risk associated with your positions. There are two reasons why Dow 7700 isn't out of the question yet:
- The polytrendline which starts with the Fed opening the monetary floodgates in 1998, shutting off the money in March 2000 and the WTC panic selloff low of September 21 will reach that Dow neighborhood around Hallowe'en. If that cycle of easy money - tight money is still affecting the market (and there's certainly good reason to think that it is with Osama on the loose), a panic could take the Dow back to that trendline.
- A 50% retracement of the accelerated runup from 1994 to 2000 in the Dow is 7702. 50% retracements are very common things in the market, so we can't rule out a quick dive to 7700 and reversal into a big bull move.
We could retest last week's high again before this week's rally is over. Just getting through this seasonal rocky period will be enough: we don't want to chase the market either up or down. Rather, we'll wait for it to come to us.
Nasty Rumor Department
We heard from a subscriber a rumor that FOLIOfn had a round of layoffs and had stopped accepting new accounts. Now, by itself, the layoff part is not too surprising, at least to us. High tech companies are in a Depression, and the financial markets have been very difficult to navigate. The second part of the rumor was the false part — totally untrue. We checked with FOLIOfn for a comment and they said they were operating normally, conducting their brokerage business and accepting new accounts. They did have to cut expenses in this down market, of course. That will help them continue servicing accounts until the market and the economy makes a full recovery, something we think is coming soon. And, we can't complain about FOLIOfn's service: our trades Monday afternoon executed without a hitch.Enhancements to the Website
We added some real-time relative strength indicators to gauge the intraday health of the market. Joining the NASDAQ-100 are the Value Line, S&P SmallCaps and S&P MidCaps as they are compared to the S&P 500 benchmark index.A note on the NASDAQ-100: after the market close at 4:00 p.m. Eastern Time, the changes in NDX are reported relative to the current day's 4 p.m. close, so the relative strength numbers will not reflect changes which occured during the preceding session. In particular, index changes on the Dynamic Relative Strength Table page will not agree with those shown on the intraday indicator because of this factor.
Format for printing. [Go back]
| Portfolio Performance:[chart] |
For Monday, October 22, 2001 © Bob Carver |
| +78.48% vs NASDAQ | Dow Industrials | Small Caps | NASDAQ |
| +40.64% vs S&P 500 | Bull Market | Bull Market | Bull Market |
^SPX
· ^IXQ
· ^NDX
· ^DJI
· ^MID
· ^OEX
· ^NYA
· ^VLE
· ^RUT
· ^SML
· ^CRB
· ^XAU
· ^BTK
· ^TYX
Stocks: Hallowe'en Ahead
Technical and fundamental analysis have their limits, as we all recognize they do. Right now, the most important factors affecting the markets are the unknown plans of Osama (the disinherited former bin Laden family member). No amount of analysis can tell us when or if the terrorists led by Osama will strike. That's no reason to abandon the markets, but it is a good reason to narrow our investment horizon down to what we normally consider the short term and to take actions which are more trading in nature than investing. That's the nature of this market environment right now: it's about as far as you can get from the buy-and-pray environment of the 'Nineties. The 'Naughties (this decade) have turned out, so far, to be well-named.And that's not to say there aren't great opportunities in the market right now. For instance, in looking over our Model Portfolio this weekend, we noted that if we had become so bearish as to stay out of the market, we would have missed a 134.16% gain in DRMD (Duramed Pharmaceuticals). We could have stayed on the sidelines and missed a 56.95% advance in HLYW (Hollywood Entertainment). Sure, there are some losers in our list: we wouldn't expect anything different in a bear market. The point is that this is a stock-picker's market and despite the secular bear market call of Bear Stearns' analyst Louise Yamada, that's no reason to shun stock investing. We just have to be a bit more aggressive in taking profits, especially when it comes to market index exposure, as this last week has demonstrated.
It's also an environment where the use of leverage could be dangerous to your financial wealth.
Whether the rally off the September 21 panic low was just an oversold bounce and short covering extravaganza, or the real beginning of a new bull market, isn't particularly relevant. We have to be very short term oriented because we know Osama has the potential to strike the US again. We can, of course, attempt to use technical tools to pinpoint those points of maximum danger. In addition, it's theoretically possible that we might see Osama's agents' tracks in the Money Flow indicator if they are heavily shorting stocks ahead of the next attack. Although we'll probably never know exactly who it is doing the buying and selling in creating those Money Flow figures, it is a way to gauge real-time market intentions on a statistical basis. Like any indicator, it can be wrong, so you take the indicator for what it is: a barometer, nothing more or less. It does have a great advantage over many other technical indicators: it is a coincident indicator, rather than a forcasting (sic) indicator like Time Cycles. Time Cycles, by the way, have been jumbled by recent events and we now feel that they are unreliable in forcasting the market.
The attack on the World Trade Center occured on the 11th of September. That date was the projected Time Ratio Low for both the Dow Industrials, representing the most watched market index of blue chips, and the Value Line Index, representing the broadest measure of the most liquid stocks traded on US exchanges. From the point of view of maximum downside pressure, the attack could not have come at a worse time for the market. When the market is making a low, bullish investors are doubting the wisdom of holding long stock positions: many have already sold and many more are close to stop loss trigger points. A devastating event like the WTC bombing is enough to change market direction as it pushes panicky investors who would have likely held onto positions through the low to hit the sell button and force the market indices far lower than they otherwise would have gone. Thus, the market continued lower into September 21, ten calendar days later than the original forcast from Time Ratios.
Using the current market action, we have determined that the next Time Ratio Low is due on October 31, Hallowe'en. That is thus the next date of maximum theoretical downside pressure. If the market is shocked again on that date, it would likely lead to a later low, perhaps mid-November to early December, a period of time when the long term resistance trendline along the rally tops is forcasting a market low.
Whether the low is behind us or within the next two months, the stronger stocks will very likely stay stronger than the market: their lows are very likely behind them. It thus is our intention to stay the course: attempt to ferret out those strong stocks, buy them on market dips and attempt to be fully invested at the next market bottom.
One thing we have seen in our experience at major market bottoms is that the strongest stocks make their largest percentage gains in that initial period following the market bottom. There's a ``ganging-up'' effect: the smart money, recognizing it's time to get fully invested, naturally gravitates to those strong stocks. And, during this tax-selling season, stocks which are showing overall losses tend to be sold by investors first (to use in offsetting gains and lowering or eliminating capital gains taxes). While there may be some fantastic bargains to be found among the big losers, the pressure from tax selling cannot usually be counted on to ease up until late December. That said, smarter investors will sell their losers earlier in the year with the intention of waiting at least 31 days and buying those shares back (due to the IRS' wash sale rule, those losses cannot be used to offset gains otherwise).
Another seasonal factor to watch out for is the tendency for mutual funds to distribute capital gains. Buying shares in a taxable account just before those gains are paid out to shareholders creates a tax liability representing a simple return of capital: in other words, you take the money out of your left pocket, hand some of it to the tax man, and put what's left in your right pocket. If it weren't the government it would be a criminal act know as theft. In fairness to the government, however, we should point out that this ``theft'' is reversed when the mutual funds are sold. Maybe the process should be regarded more as a temporary loan to the government rather than outright theft. The net result, of course, is that the government pays no interest on the loan and you've lost the opportunity for that money to work for you. So, watch out for the ``return of capital'' effect in mutual funds. Just one more reason to hate mutual funds.
Strategy: the market is likely to continue volatile. The initial wave down last week was very bearish from a pattern point of view, using Elliott Wave. After five waves down, the market has consolidated near the lows in an a-b-c pattern, with the wave b making a lower low than the preceding wave 5 low. That's very bearish (an irregular correction in Elliott warns of much weakness in the market), despite the Friday rally (which we're counting as a wave c affair). The best strategy here remains our existing strategy: sell weaker stocks on rallies and buy strong ones on dips. Right now, we're at about a 50% cash position in our Model Portfolio, so we have to be on watch for indications that our market call might be too bearish and be quick to turn bullish if the coincident indicators suddenly shift to bullish. For instance, Money Flow, which diverged very bearishly before last week's dip, continues poor. If it were to suddenly show great buying support (via bullish divergence), we would be forced to reassess that 50% cash position to buy strong stocks. We have a shopping list of strong stocks to buy so that when that time comes, we'll be ready to put that plan into action.
Remember, we're not wedded to the bearish case. But, we recognize that from the technical indicators we follow, it's very possible that the Dow Industrials could plunge to the vicinity of 7700 by the middle of November. If that happens, we want to be in a position to buy great stocks at great prices, not to be panicked into selling out right at the bottom. On the other hand, missing out on a great rally is just as bad from the point of view of missed opportunity, which is why we are 50% invested right now.
One of the pieces of information we want to see right now is just how much of the decline the market can retrace. If it can retrace more than 62%, it's very bullish and would negate much of last week's problems (poor Sentiment on our Intraday Dollar-Weighted OEX Call-Put Sentiment Ratio
A Long Term Observation. We noticed that on the very long term the market uptrend is still intact from a polytrendline point of view. This fact argues that the long term secular bull market is still intact. The interesting thing we noted from a long term look at the Value Line chart was that the uptrending polynomial line which is defined by key support lines in 1990, 1994 and 1998, was not breached at the September 21 low. The market came very close to it, however. And, a successful retest of that line could mark the beginning of a bull trend that would carry the broad market higher until September 2008, a time period which has come up in other studies as the likely end of the secular bull market. From this observation we believe it is best to assume the long term uptrend is still well in effect and make long term investment decisions in the direction of that long term trend, at least until that assumption is proven wrong. We can certainly make money in a bear market (there are always some strong stocks bucking the trend), but the potential remains for spectacular gains when we hold those strong stocks in a bull trend. There is definitely no reason to be overly-bearish about that long term trend — yet.
Thus our plan remains to buy the strong stocks and rapidly grow our fortunes to the end of the secular bull trend in seven years. Our goal (which comes without any guarantees that we will actually acheive it) is to realize a 100% gain on our portfolio in each of those next seven bull market years.
Australian All Ordinaries:
As expected, the market found the old yellow (``Old Yeller?'') support line had turned into stiff resistance when the index bumped up against it from underneath. This doesn't mean the market will not be able to break above it, but it does mean that a lower growth rate in the market from here is likely. And, the short term holds great dangers as the discussion above suggests. Still, the Australian economy is very strong and should be able to recover and resume an upward trend: the weak Aussie dollar helps exports and tourism to the area. And, it provides great bargains for foreigners wishing to invest in Aussie assets. It's also good for Aussies who wish to invest in foreign assets, especially the US, whether the relative strength of the US$ over the A$ creates double gains (and cushions the losses somewhat). It's no coincidence that some of the Aussie stocks are highly ranked on our technical ranking system. But, from an index point of view, there are potential dangers directly ahead.A big cut in the GST (Sydney Morning Herald link) could be just the medicine to stimulate the economy.
Australia Business News
Yahoo! Full Coverage of the Australian Economy
London Financial-Times 100:
The downtrend expected in the US market is likely to hit the FTSE just as badly. The downturn last week came right in the area of the overhead resistance polytrendline, so a breakout above that line could indicate a sea change. Otherwise, the US market remains the key to the puzzle.U.S. Dollar Index:
The weak rally in the Dollar Index led to bearish divergence at last week's rally high, portending a possibly severe reversal of that rally shortly. However, the next polytrend projection of a low now points toward mid-November for the beginning of a bull trend in the US Dollar Index. That's in line with a topping bond market (higher interest rates attacts foreign capital), plus a rising stock market (rising stock prices attracts foreign capital, also). And, it's in line with a recoverying US economy. Yet another reason not to get too bearish on the US stock market!Australian Dollar:
The very weak Aussie Dollar managed to retrace some more of its losses last week, but remains below that long term (yellow) resistance polytrend line that has created an impenetrable ceiling for the last 5½ years. If we were forced to make a pattern call, we'd probably label this pattern a wave 4 contracting triangle which will eventually puncture that resistance trendline moving sideways, then collapse in a wave 5 down, ending the bear market in the A$. If it turns out to be a contracting triangle, targeting that bottom will be relatively easy. At this time, it's too early to set time targets.In the near term, treat this market as a tight trading range, using divergence on oscillators for trading signals, especially stochastics, as well as short term trendlines near the boundaries of the trading range, if you're trading it (both the long and the short side, but favoring the latter as it's the longer term trend).
Canadian Dollar:
The Canadian Dollar reversed last week, heading back down in the direction of the underlying trend. Nothing has changed to turn this picture bullish and our projection of a turn to the bullish case still points to 2003.Bonds / Interest Rates:
Some think that deflation will bolster bond prices. Others think the War on Terrorism will force too much government borrowing, putting upward pressure on bond rates (downward pressure on bond prices). As you are no doubt aware, we believe the technical indicators are saying that the long term bond bull market may be over. The retest of the prior high last week saw a sudden, severe reversal in the December 2001 T-Bond Futures(http://www.marketclues.net/cgi-bin/myclues?chart=/:/indices/d/_tnx.4903.html): 10-Year Treasury Note Rates
Bond Page at Open Directory Project (http://dmoz.org/Business/Investing/Stocks_and_Bonds/Bonds/)
Michelle Girard's Treasury Market Update (http://www.prusec.com/market_news/treasury.htm)
Sectors and Individual Stocks (Subscribers Only)
For tables ranking sectors and individual stocks, and links to charts of 3500 individual stocks and sectors, please visit your very own MyClues Home PageFor a 1-2 month free trial subscription, click here.
Commodities (Subscribers Only)
Commodity News Summary (http://www.ctrader.net/)
For complete charts of commodities, please visit your very own MyClues Home Page
- Daily Indices, charts of sector and popular stock and bond market indices on a daily basis
- Quarter-Hourly Indices, charts of selected indices on a 15-minute basis
- Daily Futures, charts of futures markets on a daily basis
- Quarter-Hourly Futures, charts of those same futures markets on a 15-minute basis
For a 1-2 month free trial subscription, click here.
CRB Index:
Incredibly, the CRB Index continues to track our red polytrendline lower and lower. Until that linkage is broken, we have to continue to warn of deflationary forces in the commodity market — and that icy grip on the world continues to pose severe threats.
Format for printing. [Go back]
|
For Friday, October 19, 2001 © Bob Carver |
Stocks: Consolidation Near Lows
The market consolidated its losses near Wednesday's closing levels. The initial wave down traced out a very clear and bearish five waves down in very short order. That completed downleg needs retracement/consolidation before the next surge. We can get an estimate of the strength of that next leg down by the percentage by which the market retraces that initial leg down. The average downleg is retraced by approximately 50%. A lesser percentage retracement would be a hint of much more weakness ahead.The market is topping in an area which should have been a low forcast by Time Cycles. This is bearish for the short term and could indicate that some market indices are in more trouble than we had thought. Coupled with hints that the next terrorist attack will focus on shopping malls on Hallowe'en (October 31) and we suggest the market has the potential for some rocky shoals ahead.
Of course, we will be paying more attention to what the market is telling us in the way of Money Flow, Sentiment and other current indicators, rather than making decisions based solely on forward-looking ones. Right now, the market isn't showing much health: only 6% of all stocks are rated #1 on our ranking system, while 66% are ranked at the bottom of the barrel. Some of this is undoubtedly seasonal in nature, of course, as investors unload losers to take advantage of tax laws. Perhaps they intent to buy some of those shares back after waiting the requisite month. Perhaps not.
In any case, a retracement rally may be in order here, but the first shoe has fallen and it sends a bearish short term message.
Thanks to those who renewed their subscriptions! We understand that it's a difficult time for America and for investors, but we have faith that we will work through these economic problems in good shape and doing much better in the years ahead. We definitely appreciate your support. We can't promise profits on your buys, but we certainly know that we have stacked the odds on that side of the equation:
- The long term uptrend in stocks remains in effect.
- Our technical rating system continues to pick the strong stocks.
- The underlying economic system is strong and some percentage of stocks will greatly outperform the market.
Therefore, we believe that remaining invested (albeit with about a 50% cash position for the short run) in the strong stocks continues to be the preferred strategy.
Format for printing. [Go back]
|
For Thursday, October 18, 2001 © Bob Carver |
Stocks: Key Reversal
The stock market reversed trend Wednesday and headed lower, as we've been expecting from the very poor Money Flow divergences and overly-bullish Sentiment figures. Although bearish on the short term, the Money Flow figures are extremely bullish on the long term. Thus, we believe this to be a correction of an ongoing bull market trend.It was interesting to see how the mass media described the selloff. According to them, the market rallied on good earnings from IBM and Intel, and fell on Anthrax fears. Of course, they failed to note that the market actually rallied on short covering and fell on a lack of buying support. It's a good object lesson in just how wrong the crowd can be.
And, we hope you appreciate the outstanding indicators we provide to you on the website. Without your support, this website cannot continue. We hope you appreciate that our ultra-low subscription rate of $49 is probably the best bargain around. But, we won't be able to keep the website alive without those subscription dollars. If you are thinking about renewing your subscription, you can do via PayPal.com or via check. The details on renewing can be found here (http://gamma.dhs.org).
Format for printing. [Go back]
|
For Wednesday, October 17, 2001 © Bob Carver |
Stocks: Bearish Money Flow Divergence
The market rallied — and the sellers came in to sell in volume. That created the purplish band shown here in the Intraday Market Clues Money FlowThat's why we sold more stock Tuesday, leaving the Model Portfolio with about a 50% cash position by the end of the day. The Money Flow divergence was bad enough to increase cash reserves by itself, but confirmation came from our Intraday Dollar-Weighted OEX Call-Put Sentiment Ratio
We'll be looking for better prices to purchase strong stocks. For now, the indices as well as the entire market are in a risky situation.
Format for printing. [Go back]
|
For Tuesday, October 16, 2001 © Bob Carver |
Stocks: Market in the Danger Zone
Sentiment once again rose into the overly-bullish zone above 2.00 on our Intraday Dollar-Weighted OEX Call-Put Sentiment RatioThe pattern call suggests an Elliott Wave contracting triangle, which would logically call for one more spurt higher.
The S&P 500 Index
Index traders: given the excessive bullish sentiment, the odds favor another rally. However, this rally is coming off an overbought base and could reverse quickly, especially if a particularly unsettling news event sends buyers running for the hills. Look for oscillator and Money Flow divergence to signal a weak rally if we get it. The correction could be sharp.
Stock investors: We may choose to take some short term profits in order to put that cash to work on the next dip. Stay tuned.
Bonds / Interest Rates:
Our opinion on bonds remains extremely bearish, with five Elliott Waves having been completed recently (see the December 2001 T-Bond Futuresagree with us (plain text readers will find a link on the website).
(http://www.marketclues.net/cgi-bin/myclues?chart=/:/indices/d/_tnx.4903.html): 10-Year Treasury Note Rates
Bond Page at Open Directory Project (http://dmoz.org/Business/Investing/Stocks_and_Bonds/Bonds/)
Michelle Girard's Treasury Market Update (http://www.prusec.com/market_news/treasury.htm)
Sectors and Individual Stocks (Subscribers Only)
For tables ranking sectors and individual stocks, and links to charts of 3500 individual stocks and sectors, please visit your very own MyClues Home PageFor a 1-2 month free trial subscription, click here.
Commodities (Subscribers Only)
Commodity News Summary (http://www.ctrader.net/)
For complete charts of commodities, please visit your very own MyClues Home Page
- Daily Indices, charts of sector and popular stock and bond market indices on a daily basis
- Quarter-Hourly Indices, charts of selected indices on a 15-minute basis
- Daily Futures, charts of futures markets on a daily basis
- Quarter-Hourly Futures, charts of those same futures markets on a 15-minute basis
For a 1-2 month free trial subscription, click here.
Format for printing. [Go back]
| Portfolio Performance:[chart] |
For Monday, October 15, 2001 © Bob Carver |
| +78.59% vs NASDAQ | Dow Industrials | Small Caps | NASDAQ |
| +40.74% vs S&P 500 | Bull Market | Bull Market | Bull Market |
^SPX
· ^IXQ
· ^NDX
· ^DJI
· ^MID
· ^OEX
· ^NYA
· ^VLE
· ^RUT
· ^SML
· ^CRB
· ^XAU
· ^BTK
· ^TYX
Stocks: Sentiment Too Bullish
Although the rally has carried the market much higher than the many bears thought it would (some of the buying was due to forced buying as bears covered short positions), the sentiment figures, most importantly our own Intraday Dollar-Weighted OEX Call-Put Sentiment RatioCyclically, as well as seasonally, the market is due for a low, ideally this week. One of the things the market is prone to do is to fool the majority at a major low by rallying into a long term bottom. Yes, that's right; expanding upon that statement: the market will often rally on a short term rising time cycle right into the forecast long term cycle bottom. It's a great head fake. And, as you are probably aware, the market tends to do the opposite of what the majority think it should do. After rallying right into the major cycle low on the back of a rising short term cycle, as that short term cycle rolls over and heads down, it will send the market tumbling back down to retest the prior low. That's the potential right here as well. We had a major trading cycle low in late September. Once that trading cycle tops and heads lower, we could get that retest. At this point, the down cycle could carry the market lower into late November or early December.
Lest we come across as turning bearish, don't think we are. We are trying to be realistic and assess all the risks. For all we know, the market is about to break out and rally even more sharply higher. We certainly wouldn't complain, despite the fact that we've raised our cash position in our Model Portfolio to about 25% (and may raise some more cash this week; to add your registered email address to the notification list, just click on ``Notify Me By Email'' on the Special Reports header — that's on your MyClues Home Page on the website — the link is at the top of this message). Our strategy is to prune the weaker performers from the portfolio if the market is rallying. We then look forward to the next major dip to buy stronger stocks with that cash position. Whenever that next dip comes, sooner or later, we expect the market to provide us a good buying opportunity and we stay patient until then. We like to take the attitude expressed by Larry Williams, ``Be quick to turn bullish, slow to turn bearish.''
Even during this recent bear market, that motto, as well as our strategy, has proved its worth: despite a horrendous September this year, our Model Portfolio continues to outperform the market and shows a profit for the last year (+16.08% as of Friday's close). Although we have made slight alterations to our strategy at various times, we believe this is the proper strategy to handle this market, one which has transitioned from a 'Nineties-style index extravaganza to a 'Naughties-style index depression. Indices are fine during the right kind of market. We recommended index investing before it was popular with the crowd, in fact, back in the 'Eighties. But, when the major top of March 2000 arrived, we first glimpsed the shape of things to come: the leadership in the market had changed. Before that peak, the bluest of the blue chips joined the bubbliest of the NASDAQ to push market indices to unsustainable heights which matched only the peak of 1929 in its effervescence. After that peak, the mid-cap and small-cap stocks, which had greatly underperformed those blue chips in the two years preceding that peak, assumed leadership roles. By the middle of 2000 it was clear that an index-only strategy was less than optimal and that the market environment had shifted to one of great selectivity. Fortunately, this period coincided with the arrival of brokerages like FOLIOfn.com, providing the means for every investor to create a broadly-diversified portfolio of stocks. The key tool we developed was an objective system for selecting stocks (not a perfect system: such an animal is impossible). Then, we devised a strategy for buying and selling those stocks: boiled down to one key phrase it amounts to ``buy the dips, sell the rallies.'' In other words, we buy high-ranked stocks on market dips and sell weaker performers on market rallies. This creates a portfolio which continually refreshes itself with higher-ranked stocks relative to the market. And, with the hindsight afforded by the last 13 months of actual, real world experience with a real money account (our Model Portfolio is an actual folio), we've proven that strategy can outperform the indices. Of course, we have not proven that strategy will outperform the indices in the future, or even be profitable in the future: no one can ever claim that. You cannot eliminate the risks of losing money, but you can definitely stack the odds in your favor.
Elliott Wave-wise, the downleg from May to September traced out a well-defined five waves. That analysis method says that a trend change to a bull market occured on the 21st of September. Assuming Elliott is correct, the current rally is wave 1 and should be retraced in a wave 2 correction of up to 62% of the net advance of wave 1.
The NASDAQ-100 Index has been leading the charge higher. That's also a bullish sign. Since the 21st of September, here are the leading sectors:
Sector Percentage Gain INX: Internet Index +33.76 DOT: The Street.com Internet Index +31.84 GSM: GSTI Semiconductor Index +29.27 GHA: GSTI Hardware Index +28.91 GSO: GSTI Software Index +28.06 XBD: Broker/Dealer Index +25.36 NWX: Networking Index +24.84 IIX: Internet Index +24.81 SOX: Semiconductor Index +24.11 GIP: GSTI Multimedia Networking Index +23.86 NDX: NASDAQ-100 Index +23.68 It certainly appears that prospects for the tech sectors are brighter than most people think they are. We've contended that this depression in high tech would reverse into another tech boom and have not changed that opinion. It's heartening that the majority seems to think the Internet bubble was of no lasting substance. It wasn't: the Internet changes everything. Some Internet stocks will return with a vengeance. The next leg up will be based upon profit expectations, rather than ``eyeballs.''
We're right in the timeframe for a seasonal low right now. Or, as a subscriber pointed out, what we might call a ``Yearly Buying Spree.'' Buying dips, especially in the final quarter of the year, traditionally is rewarded by excellent profits when those shares are held into April. Time cycles suggest a similar scenario this year.
Model Portfolio Managed Accounts Update
Several subscribers indicated an interest in having us manage accounts for them at FOLIOfn based upon the Model Portfolio. Since Market Clues currently operates as an exempt investment adviser (under the exemption to registration afforded by Section 202(a)(11)(D) of the Advisers Act, as a financial publication), we will need to register with the government in order to manage accounts, a process which is currently underway. We will let you know when that registration is in place, as well as details such as account minimums, fees and so forth.Index Traders Only
If you're not investing in individual stocks, this extended market should be making little net progress in the next week or so. It also could be subject to a 50% or greater retracement of the September - October rise in November - December. With the long term trend up, we suggest focusing on buying dips and selling rallies. Watch the relative strength of the NASDAQ-100 vis-a-vis the Dow Industrials to hint of a reversal. The dip Friday was a warning shot across the bow. Pay attention to what the market is doing, not what the forcasts say. The rebound Friday afternoon said that it wasn't quite ready to go down. That said, however, the market remains very sensitive to war news.Australian All Ordinaries:
The All-Ordinaries continues to bounce from its steep September plunge. It, however, met resistance at the yellow polytrendline shown on the chart on Friday. That former support line could provide at least a temporary ceiling. If it does, the next major move would be a retest of the September low. War news will keep the market on edge, of course.Australia Business News
Yahoo! Full Coverage of the Australian Economy
London Financial-Times 100:
The FTSE-100 Index has jumped nicely higher since the September lows. In fact, the AD Oscillator on the chart shows just how overbought the index has gotten. A minor consolidation here is likely to see further gains ahead and would be very healthy. In general, however, the FTSE will be quite sensitive to war news, as will stock markets worldwide.Bonds / Interest Rates:
Prospects for economic recovery in the US sent bonds skidding last week. We have probably seen the high in bond prices for quite a while. Next test is the accelerated support line in the December 2001 T-Bond Futures(http://www.marketclues.net/cgi-bin/myclues?chart=/:/indices/d/_tnx.4903.html): 10-Year Treasury Note Rates
Target 2025 Zero Coupon Bond Fund Quote (http://www.americancentury.com/funds/fund_facts.jsp?fund=968)
Bond Page at Open Directory Project (http://dmoz.org/Business/Investing/Stocks_and_Bonds/Bonds/)
Michelle Girard's Treasury Market Update (http://www.prusec.com/market_news/treasury.htm)
Sectors and Individual Stocks (Subscribers Only)
For tables ranking sectors and individual stocks, and links to charts of 3500 individual stocks and sectors, please visit your very own MyClues Home PageFor a 1-2 month free trial subscription, click here.
Commodities (Subscribers Only)
Commodity News Summary (http://www.ctrader.net/)
For complete charts of commodities, please visit your very own MyClues Home Page
- Daily Indices, charts of sector and popular stock and bond market indices on a daily basis
- Quarter-Hourly Indices, charts of selected indices on a 15-minute basis
- Daily Futures, charts of futures markets on a daily basis
- Quarter-Hourly Futures, charts of those same futures markets on a 15-minute basis
For a 1-2 month free trial subscription, click here.
CRB Index:
No real change: the CRB Index continues to track the steepening polytrendline (the red one) in the chart as it descends. 182.67 is a very significant low: it was the July 13, 1999, low. A break below that level would likely setup a ceiling there.U.S. Dollar Index:
The downtrend is still in effect. A low is likely to occur in mid-December, with a rise into May-June 2002.Australian Dollar:
The long term trend remains down, with the intermediate term neutral. The pattern here is very likely some kind of Elliott flat pattern. If that's the case, we're in wave b down within that pattern (wave a was the rally from April to August). A new low is possible, but not required for this pattern. If a new low does occur, it will be reversed in fairly short order, with the A$ rallying in wave c thereafter.If this call is accurate, the bear market may have many more months to run.
Canadian Dollar:
The rally relieved the oversold condition of the C$, but seems to have formed an ABC (corrective) pattern, suggesting a decline to a likely new low ahead.
Format for printing. [Go back]
|
For Friday, October 12, 2001 © Bob Carver |
Stocks: Investors Turn Bullish
The market leapt ahead again Thursday: the NASDAQ-100 jumped 6.53%, but INX Internet Index more than doubled that gain, posting a 15.04% leap. Taking the first five places in our sector leader board were internet and semiconductor sector indices, with mostly double-digit percentage gains.Most of the top twenty sectors were high-tech related. The only non-tech sectors which appeared were XBD Broker-Dealer Index (+8.31%) and XAL Airline Index (+5.07%). It is definitely a tech-heavy rally. It almost makes one think the late great tech bubble might be making an encore appearance!
And, yes, while the gains are outsized, sentiment is getting a bit frothy. For the first time since the rally began, our Intraday Dollar-Weighted OEX Call-Put Sentiment Ratio
Refresher Course: Divergence occurs when a series of prices moves in a direction different from an indicator, in general. For instance, bullish divergence appears when prices are moving generally down while an indicator is moving up. Bearish divergence appears when prices are moving generally higher while an indicator is moving lower. The Intraday Market Clues Money Flow
So far, we haven't seen enough evidence to indicate a pullback is near. However, after several days of moving higher, the market is in overbought territory and needs a consolidation, whether that consolidation takes the form of a sideways trading range, or a sharp pullback. We're husbanding our cash reserves in anticipation of the next buying opportunity, having raised some cash on the Thursday morning gap higher in an effort to have some buying power available and to raise the overall quality and technical ratings of the stocks in our Model Portfolio.
Format for printing. [Go back]
|
For Thursday, October 11, 2001 © Bob Carver |
Stocks: Money Flow Shows the Way
The market leaped higher Wednesday. It may have been a surprise to some chart readers, though. The downward-facing contracting formation (not really a contracting triangle) would lead some to think it would resolve into a breakdown.The key element which argued in favor of an upside breakout was the very bullish Money Flow Divergence bar (the green bar in the Intraday Market Clues Money Flow
And, with the Money Flow Line closing at an all-time new high, we don't have any bearish divergences which would warn of a top just yet.
After giving back a large bite Tuesday, SOX (the Semiconductor Index) came back strongly on Wednesday, gaining 6.72% for the day to take second place among sectors we follow. First place, though, went to the INX Internet Index, with a jump of 8.7%. Strangely enough, the TRX S&P Transportation Index and the OSX Oil Service Index gained 5.4% and 5.39%, respectively, to come in at 5th and 6th on the ranking list; it's unusual to see both a transportation index and an energy index rise on the same day by almost exactly the same amount.
In general, a slew of high-tech sectors advanced Wednesday along with some energy and transportation issues. BTK, Biotechnology Index, put in a good showing as well with a 4.31% surge, although that put it all the down at 14th place in the standings.
On the flip side of the ledger, gold stocks (HUI, XAU, GOX) took gas, along with the utilities (UTY, UTIL). Everything else showed gains for the day.
Among broader indices, NDX NASDAQ-100 gained 5.29%, SML Small-Caps lifted 3.49%, RUT Russell 2000 hopped 3.18%, and MID MidCaps stepped up 2.75%. All beat the S&P 500 and Dow Industrials, which gained 2.29% and 2.17%, respectively.
Format for printing. [Go back]
|
For Wednesday, October 10, 2001 © Bob Carver |
Stocks: Waiting for Godot
The market went virtually sideways Tuesday with no clear direction. The Money Flow figures remained relatively sanguine as neither bulls nor bears were willing to commit funds. The OEX $-weighted volume figures reflected this with total $-volume at $17,800,000 while both Friday and Monday registered near $25,000,000 in volume. Clearly, very few are quite ready to commit until they see further news, good or bad. Despite that, strong call buying near the close sent the ratio soaring to 1.74, an indication of institutional interest in the bull camp.SOX gave back some of their gains on strong profit-taking, but Gold sectors were not far behind. On the positive side of the ledger, the leader was Broker/Dealer stocks (XBD), a ray of hope for the bulls since that group tends to lead the way out of bear markets.
We're still patiently awaiting dips to put cash to work. The bears' time is running out very rapidly now: a retest of the lows is possible in the next week or so, but, after that, things grow increasingly bullish from a cyclic point of view.
Format for printing. [Go back]
|
For Tuesday, October 9, 2001 © Bob Carver |
Stocks: Waiting for Resolution
The market treaded water Monday, watching the progress of the War in Afghanistan. Initial selling pressure subsided quickly, but there was a clear decision from the bulls to await further news before taking substantial long positions. And the bears weren't willing to press the downside, fearing a repeat of the January 1991 experience.The market would love to see a resolution soon in this conflict. Calls for a Jihad have elicted a muted reaction among Islamics as cooler heads prevail with the recognition that terrorism are antithetical to Islam and most Muslims' personal values. The biggest influence the terrorists have created, ironically enough, has been a Martyr Effect as some long term enemies find themselves on the same side of the fence, and actively supporting the same goal. If the coalition can hang together to defeat bin Laden and the Taliban, the prospects for increased international cooperation could mean this war not only rids the world of a growing cancer (or puts it into severe remission), it may create an environment where new trading relationships usher in a growing basket of wealth, not only for Western civilizations, but for people of this planet everywhere.
Obviously, it's too early to say a new, more cooperative world is dawning. But, the seeds have definitely been sown. It's now up to the civilized world to declare an end to war with this war to end terrorism.
The markets' indecision is certainly a good sign: neither a hyperkinetic rally nor a panicky selloff suggests investors have factored in the effects of hostilities. Significantly, it was high tech sectors which held up best Monday as the SOX (Semiconductor Index) gained over 5% since Friday's close, followed by GSM (GSTI Semiconductor Index) up 3.92%, TXX (Technology Index) up 1.92%, NWX (Networking Index) up 1.59%, and so forth. The techs, in fact, held the top 13 positions for the day (XNG, the Natural Gas Index, held 14th place with a 0.61% gain). That's a bullish sign since the tech indices tend to be leading indicators for the rest of the market.
We remain long term bullish, looking for bargains to buy on dips.
Format for printing. [Go back]
| Portfolio Performance:[chart] |
For Monday, October 8, 2001 © Bob Carver |
| +77.76% vs NASDAQ | Dow Industrials | Small Caps | NASDAQ |
| +38.02% vs S&P 500 | Bull Market | Bull Market | Bull Market |
^SPX
· ^IXQ
· ^NDX
· ^DJI
· ^MID
· ^OEX
· ^NYA
· ^VLE
· ^RUT
· ^CRB
· ^XAU
· ^BTK
· ^TYX
Stocks: Employment Tumbles Pre-WTC
The so-called September Employment Report released Friday morning revealed shockingly-high job loss figures: 200,000 jobs were lost before the World Trade Center bombing on September 11th. Undoubtedly, the figure for ``October'' will be considerably higher than that. A conservative estimate of job losses since the attack puts the number at 100,000; a more realistic assessment would suggest a million jobs will be destroyed by the end of this calendar year. The need for government action on the economy is clearly imperative and action is coming, we're told. The Demos balk at cutting taxes, preferring to feed the hand that supports them (lower- and middle-class wage earners), while the Repubs would prefer to cut corporate taxes for similar reasons. While the unanimity between the two parties on the War (or, should it better be called a blockade?) stands, they are poles apart on stimulating the economy. Thus, the market senses that standoff and should tumble back to, or below, the old lows. It's a case of Nero fiddling while Rome burns.Has the economy dipped back into recession? Apparently so. We say that because the job loss figures clearly suggest that is the case now. If so, despite the fact that employment figures are a lagging indicator, it's clear that the $1.35 trillion tax cut earlier this year had virtually no effect on stimulating demand. And, eight Fed interest rate cuts have done absolutely nothing to stop the slide. What will it take?
A war, of course. An all-out, full tilt Army-Navy-Air Force assault on a virtually defenseless country: Afghanistan this time instead of Iraq. So, from a crass point of view, to save the economy, stock market and jobs (not to mention security and safety of all civilized countries), the coalition of civilized countries are likely to be moving into the ``hot'' phase of this War very soon. Certainly, the stern warnings issued by Bush cannot be misinterpreted by the recalcitrant (and incredibly bone-headed) Taliban. We should expect full-scale military violence within the next ten days to eliminate this threat to freedom. And, send the market soaring again, just like it did in 1991 following the outbreak of the Gulf War. Sometimes, history does repeat. Not exactly, but the echoes are eerie.
Click for full chart.
Examining the 1990-1991 period, we note that the market sold off from July to an October 1990 bottom preceding the Gulf War, then rallied modestly into January. When the war broke out in mid-January, the initial reaction was a sharp selloff, followed by a reversal and tremendous surge higher. That surge higher continued, on a trend basis, for the next three years, into early 1994. The lesson to be learned from that experience is that while the recession in the economy didn't end immediately, the stock market went roaring higher once it was clear that superior firepower would make mincemeat of Iraq. And, we shouldn't expect much to be left of Afghanistan other than a very large cloud of dust after the coalition pounds them. This time, they're going to cut off the head of the snake, something they didn't do in 1991 to their great regret. It doesn't appear that they will take on Iraq in this war, but such an escalation of the War cannot be ruled out.There probably will be a stock market selloff going into the actual fighting, along with a flight to ``quality'' rally in bonds. But, once the outcome is clear, and that could take much longer than our experience in 1991 because the blame can't be so easily placed upon bin Laden as it was on Saddam Hussein, the market should celebrate with a nice rally. Why are we so confident of victory? Simple: the terrorist side seems to be bent on losing the war: every new terrorist attack they launch just makes it clear that these vermin must be wiped out before they kill again. For every innocent person killed in these terrorist incidents, far more reasonable people of Islam realize that the only good terrorist is a dead terrorist and support eradication for the good of all. In other words, all, or most, Arab countries are moving more and more into line behind America in this campaign.
Now is the time to get together a shopping list of companies to buy. While there are going to be some companies which spent too much money during the bubble to survive (and, indeed, many have already shut their doors forever), there are many companies which built up nice cash reserves to weather this storm. If oversupply is the problem now, once we come out of this dip, there will certainly be an undersupply and fewer companies to benefit from the situation. Thus, the strong companies (those with loads of cash to weather the storm in the first place and a good strategy for dealing with customers) will come out of this stronger than ever.
We're making a shopping list ourselves using the tools on the website. Here's how we do it:
On any of the stock ranking tables you'll find linked from your MyClues home page (such as the Persistent Timeliness Report), you'll notice there's a column labeled, ``Add to Portfolio''. That column is filled with green-colored diamonds. If you look at a company and decide to add it to your ``shopping list,'' just click on the green diamond in the same row and the ticker symbol for that company will be added to your portfolio. It also will be flagged as a BUY and can be displayed on your ``Portfolio Buy/Sell Report'' (that link is just below the FOLIOfn image on the home page). Every stock you're adding to your ``shopping list'' will appear on that Buy/Sell report until you update your portfolio. Updating your portfolio (with the ``Update Portfolio'' link near the top of the home page) will cause all of the buy and sell flags to be cleared from your portfolio. But, until you do update your portfolio, you can keep those companies' ticker symbols on your ``buy list'' for future reference.
We'll be looking for bargains on any dip. And, according to time cycles, there is the potential for another ten calendar days of downside in this market. We've probably seen the price lows for this year, but that doesn't mean we won't see some panic selling in the days ahead. We will be ready to buy, especially with blood running in the streets.
We won't announce the stocks we're going to buy until we enter the order to actually buy them. At that time, those who have requested to be notified of the transaction will receive an email. To add yourself to the list, click on ``On Update: Notify Me By Email'' on the home page. You only need to do this once, of course. If you want to remove yourself from the list, just click on ``Cancel Notification By Email'' — the link to the right on the same line. The email notification will be sent to the email address associated with your account.
Managed Accounts: An Informal Poll
If anyone is interested in having us do the buying and selling in your FOLIOfn account in parallel with our Model Portfolio[s], please send us an email at bcarver@yahoo.com. At this time we don't have a program in place to do that, but we'd like to hear from you if you are interested in such a program. There would be an annual management fee for this service if we choose to offer it, a percentage of account asset value per annum, which would be in line with and comparable to other investment advisory managed account fees. The advantage to such an account would be that you would not have to keep up with changes to the Model Portfolio as they occur and then login to make those changes yourself. And, you wouldn't have to spend the time to track the individual stocks in the Model Portfolio, a sometimes daunting task when you're tracking 50 stocks or more. We also are contemplating adding additional Model Portfolios to the mix.With the upcoming uptrend getting ready to lift off in the stock market, we're coming into a really strong opportunity to get aboard at incredibly cheap prices. Remember, the typical bull market will carry the indices about 75-150% higher. A well-selected portfolio could see gains far higher, of course. Even in the past year, our Model Portfolio, an actual, real, audited account with real money in it has been able to show profits, beating the S&P 500 by 30-40% and the NASDAQ-100 by 70-80%. Of course, as you should well know, past performance is no guarantee of future results. Drop us a line if you're interested.
Australian All Ordinaries:
The bounce back has retraced approximately half of the decline so far (the exact halfway point is 3126.60). We suggest the main goal is 3197.09, the 62% resistance level. If that can be overcome, and particularly if the yellow resistance line (it used to be a strong support line) can be punctured, the rally should continue to new highs. Confirmation of this bullish outlook would come from the Aussie Dollar, which will need to breakout above the yellow resistance line on its chart.Australia Business News
Yahoo! Full Coverage of the Australian Economy
London Financial-Times 100:
Like the US market, the FTSE-100 has probably already made its price lows, but is likely to come back down to retest that September low. The well-defined resistance line in the chart will confirm the bull trend once (not if) it is broken.Bonds / Interest Rates:
The ``bin Laden'' rally in bond prices continues as America slides sharply into recession. See also remarks above under Stocks.(http://www.marketclues.net/cgi-bin/myclues?chart=/:/indices/d/_tnx.4903.html): 10-Year Treasury Note Rates
Target 2025 Zero Coupon Bond Fund Quote (http://www.americancentury.com/funds/fund_facts.jsp?fund=968)
Bond Page at Open Directory Project (http://dmoz.org/Business/Investing/Stocks_and_Bonds/Bonds/)
Michelle Girard's Treasury Market Update (http://www.prusec.com/market_news/treasury.htm)
Sectors and Individual Stocks (Subscribers Only)
For tables ranking sectors and individual stocks, and links to charts of 3500 individual stocks and sectors, please visit your very own MyClues Home PageFor a 1-2 month free trial subscription, click here.
Commodities (Subscribers Only)
Commodity News Summary (http://www.ctrader.net/)
For complete charts of commodities, please visit your very own MyClues Home Page
- Daily Indices, charts of sector and popular stock and bond market indices on a daily basis
- Quarter-Hourly Indices, charts of selected indices on a 15-minute basis
- Daily Futures, charts of futures markets on a daily basis
- Quarter-Hourly Futures, charts of those same futures markets on a 15-minute basis
For a 1-2 month free trial subscription, click here.
CRB Index:
No real change in commodity prices as they continue to track that red polytrendline heading down.U.S. Dollar Index:
The dollar remains under pressure, awaiting further data on the economy and the War.Australian Dollar:
The oversold bounce could retest the long term resistance line. Only a breakout would turn this picture bullish.Canadian Dollar:
The bounce in the C$ is relieving the short term oversold condition, but is unlikely to change the long term downtrend. Resistance remains the violet-colored resistance line, which doesn't bottom until May 2003.
Format for printing. [Go back]
|
For Friday, October 5, 2001 © Bob Carver |
Stocks: End of the Line
The market rallied right up into the gap formed after the WTC bombing, and turned down from there. We may get a downleg here to retest the September 21st panic low.While some would be disappointed by such a decline, we look on it differently — it would give us another opportunity to buy strong companies at very cheap prices. With the economic stimulation in the pipeline, this near-recession is unlikely to last long and should see the stronger stocks come roaring back. On Thursday, Dell announced it was seeing surprisingly strong sales after the mid-September lull. With the Internet playing an increasingly large role in everyday lives, the wholesale liquidation of all ``new economy'' stocks simply makes it easier to accumulate them for the gains that lie directly ahead. Our Omega Predictor, which forecasts trends based upon time cycles, points up for the next two years, making any retest of the recent lows a golden opportunity.
The update this evening is necessarily brief as we're working to reconfigure our computer systems. We hope to have the intraday updates, such as OEX sentiment and intraday charts, back online for Friday's session.
Format for printing. [Go back]
|
For Thursday, October 4, 2001 © Bob Carver |
Stocks: Breakout, For Now
The market negated the possibility of a bearish pattern we outlined yesterday by breaking above the upper trendline in the Dow chart Wednesday morning. And, also bullish was the fact that the cumulative Money Flow Line closed at an all-time high Wednesday (see the S&P 500 Money Flow chart). Since the index itself is in bear market territory, that fact speaks volumes for the risks and rewards ahead; viz., likely positive rewards at relatively low risk levels.Even more impressive was the breadth surge on both the NYSE and on the NASDAQ. The latter exchange saw a ratio of close to 2:1 (advancing issues 2405 to declining issues 1236), a very impressive performance indeed. It appears that the bears have finished their selling and have now become buyers (forced, that is, to cover their shorts). Was it the news — Purchasing Managers' Report said the manufacturing sector is expanding now (so much for the ``recession'') — or was it simply that the market realized it had found a bottom last month. It was likely a mixture of the two, and it was enough to give us a nice rally. Still, the oscillators are saying the rally doesn't have long to run and we may very well see that mid-October retest of the lows.
We remain especially sanguine on the long term view: this is the time to accumulate the strong stocks. All the while, we realize that the vast majority of stocks will need to build bases to advance strongly. There will be plenty of opportunities for buyers over the next couple of months, we think. Yes, we will continue buying on dips. And, we might even liquify some of our existing issues if they fail to perform on the rallies.
The OEX crowd didn't quite know what to make of the rally: volume was relatively light and mostly a standoff between bulls and bears. That's as it should be here.
The character of the rally can be seen from the leading sectors (you can see this using the ``Dynamic Relative Strength: 1-Trading Day Report'' Generate button): SOX Semiconductors led the list with a 9.64% gain, followed by GSTI Software (+9.19%), GSTI Semiconductor (+9.12%), INX Internet (+8.98%), and on down the high tech stock list (including our own Cubes, QQQ, with a respectable 7.77% jump). This is an important set of sectors to be leading the charge, for those are the stocks of the future: aggressive growth plays, suggesting these sectors may be the first to benefit from stimulus packages being rushed through Congress to stave off further economic malaise. It may very well turn out that the slowdown not only became more pronounced in September, but that it actually ended with the sharp stock market panic.
Format for printing. [Go back]
|
For Wednesday, October 3, 2001 © Bob Carver |
Stocks: Spree Ending?
The Monthly Buying Spree, aided by another Fed rate cut of ½% Tuesday, is going out with a flourish. But, the pattern is particularly ominous on the Dow (see the 15-Minute Dow Industrials Index). There, the pattern is a rising wedge (Elliott Wave diagonal triangle), a technically weak pattern which, if confirmed, would send the market tumbling back to test the September lows.The only bullish outcome, short term, would be a punch well through that upper resistance line. If this pattern call is correct, a minor rally here is still possible, followed by a decline which drops through that rising support line in the chart. If that happens, we could get a bounce right back up to retest that support line (which would then be a resistance line), before the market gives up the ghost short term.
We live in interesting times, unfortunately, but the pattern is pretty clear: a steep decline into mid-month is possible, even probable. We're still mostly long stocks (we did some pruning of the portfolio Tuesday morning), but we may change that as the market pattern unfolds. To be notified by email of any Model Portfolio changes, click on the ``On Update: Notify Me By Email'' link on your MyClues Home Page (if you already did so, no reason to do it again).
Format for printing. [Go back]
| Portfolio Performance:[chart] |
For Tuesday, October 2, 2001 © Bob Carver |
| +86.82% vs NASDAQ | Dow Industrials | Small Caps | NASDAQ |
| +46.88% vs S&P 500 | Bull Market | Bull Market | Bull Market |
^SPX
· ^IXQ
· ^NDX
· ^DJI
· ^MID
· ^OEX
· ^NYA
· ^VLE
· ^RUT
· ^CRB
· ^XAU
· ^BTK
· ^TYX
Stocks: Seasonal Tendencies
Stocks dipped on profit-taking Monday, but positive Money Flow (Intraday Market Clues Money FlowThe annual seasonal influences tend to be both stronger and longer lasting, of course. That makes them of much more interest to longer term investors than short term traders. We have one coming up: the October seasonal low. Every year, the stock market tends to make an important low in October, then rise into April (the rise isn't straight-line, of course, but the market oftens ends up in April far higher than the seasonal low in October). This year, that seasonal influence is probably going to be felt, and stronger than most years due to the sharp correction we've just seen. This is the right time of year for investors to put cash to work in strong stocks based upon this seasonal tendency.
The strong sectors going into this seasonal low have been defensive: gold stocks, healthcare/drug stocks, REITs, insurance, banks and utilities. Coming out of this seasonal low, we are likely to see other groups begin to lead, so expect some changes to occur over the next couple of months. One group which bears watching is the Biotechnology Index
With the war apparently about to get considerably hotter, and a Federal Reserve poised to cut interest rates either ¼% or ½%, and companies reporting earnings warnings, the market will have much to digest this week. It's likely that the indices will be stuck in a trading range between the September lows, or lower, and the September 10th high for much of the month of October. That's why we like to buy a diversified portfolio of individual issues with the goal of outperforming those market indices.
Format for printing. [Go back]
| Portfolio Performance:[chart] |
For Monday, October 1, 2001 © Bob Carver |
| +81.17% vs NASDAQ | Dow Industrials | Small Caps | NASDAQ |
| +41.65% vs S&P 500 | Bull Market | Bull Market | Bull Market |
^SPX
· ^IXQ
· ^NDX
· ^DJI
· ^MID
· ^OEX
· ^NYA
· ^VLE
· ^RUT
· ^CRB
· ^XAU
· ^BTK
· ^TYX
Stocks: Small is Beautiful
While the majority of investors are asking themselves, ``Is this a secular bear market?'' (see ``Contrary Opinion'' by Rhonda Brammer in this week's Barron's), you should instead be asking yourself, ``Which stocks are going to go up despite what the `market' does?'' It's a trap set by the pros. For years, they've been telling investors, ``You can't beat the market, so why not just buy it?'' That was based upon the faulty reasoning that markets are efficient. Hogwash! Markets are provably not efficient. It's a pie-in-the-sky theory with virtually no basis in reality on the real-world market level. So, forget about investing in the ``market,'' think about what stocks are going to outperform.Small stocks have outperformed and should continue to outperform.
The key to this market is the 1966-1982 experience. During the long sideways sojourn in the blue chips, the small stocks powered ahead, making new highs while the blue chips dipped to lower and lower lows. And, that's exactly the pattern we've seen for almost two years now, and one which should continue, with the inevitable intermissions from time to time. Now, we do believe technology stocks are going to come roaring back one of these days; otherwise, we wouldn't have bought the Cubes (QQQs) recently. However, the concentration in our Model Portfolio remains in relatively small stocks, which have shown gains over the last year (up 11.95% versus down 69.22% for the Cubes and down 29.70% for the SPYs [S&P 500 Depositary Receipts]). That's the kind of performance most fund managers would be proud to achieve.
The key to that exceptional performance in a very difficult market environment is not only stock selection. Indeed, many of our picks have tumbled with the crowd. No, the real key has been quantity — the number of stocks we've invested in has allowed us to capture some very big gainers. And, that's kept the losers from dragging our overall performance into the minus column over the last year. Of course, right now, you should be able to buy almost any set of stocks that will go up simply by throwing darts at the Wall Street Journal. But, for most of the last year, that wasn't the case.
Count yourself lucky to be in a stock pickers' paradise. It's not often you get handed so many excellent stocks selling at clearance prices. And if the bearish arguments are getting you down, just remember that the permabears were wrong for two decades, during the bull markets of the 'Eighties and 'Nineties. If you had listened to them, you'd be waiting for the Dow to drop back to 777 before buying. Don't count on that anytime in this Millenium.
Of course, there are a few bears who were actually bullish during the bull market, so we have to give them some consideration. For instance, Terry Laundry (http://www.ttheory.com/) was right and made himself and many of his mutual fund clients a lot of money. He's now a super-bear himself. What if he's right? Our answer is: he's been right for about a year now, but we've made a good profit during that year while he sat on the sidelines. Moral of the story: Don't listen to the bearish arguments! Even if they're right, it's more likely you'll just miss out on some profits in the long run if you stay on the sidelines. Of course, if it makes you sleep better at night, that's another story.
The chorus of bearish voices is all around (another sign things are not nearly so bad as they say they are). Given the dreadful events of September, isn't it unpatriotic for these bears to be bad-mouthing the American economy? Isn't it even skirting the edge of treason in wartime? Maybe the FBI had better start investigating some Wall Street types who are selling stocks short in great volumes. They're certainly doing the handiwork of the terrorists and causing far more damage in pure dollar terms. Perhaps it's time the IRS started forcing short sellers to pay income taxes on their capital gains (they're able to escape taxation through a loophole in the regulations, being able to withdraw 90% of their short-side profits and spend them without ever having to pay income tax, while long side investors get socked with paying taxes on 100% of their gains). It's time they leveled the playing field in the stock market and forced the shorts to ante up their fair share of taxes, at the very least. Suspending short sales for the duration of the war would also make a lot of sense.
What we think the country needs:
- An immediate and substantial tax cut to put income into consumers' pockets.
- Stepped-up unemployment compensation for displaced workers to maintain a normal level of consumer spending. Many European countries provide the unemployed with 95% of their normal salary. There's no reason the greatest country on earth has to be so inferior when it comes to displaced workers' incomes.
- A realization that the airline industry was a bubble waiting to burst sooner or later and that bailing it out is not in the national interest. Putting funds into a high-speed ground-based transportation system would be an investment in a brighter, more productive future than pouring good money after bad. The airline industry has never made a profit and it never will without government welfare. It's time to admit it and write it off.
- Telecommuting. Businesses should embrace work-at-home and teleconferencing alternatives to face-to-face interaction. It's very efficient and we have the capacity on the Internet today. It's just a matter of programming the software to do it right.
- Cease most immigration. For the few allowed in, require extensive background checks to eliminate terrorists and ne'er-do-wells.
Short Term Stock Markets. The rally last week was very constructive after the extended fifth wave down from that Elliott Wave contracting triangle formation in the Small Cap Index. Normally, the fifth wave out of a triangle will travel a much shorter distance. But, bin Laden planned his attacks for a technical ``Achilles Heel'' in the market. Not only did the attack occur on a scheduled Time Ratio Low point, September 11th (as was forecast here well ahead of that date), he did so as the market was entering its fifth and final wave down, a thrust decline out of that contracting triangle. In doing so, he hammered the market when it was at its weakest, causing immense panic among money managers (but not the public, thank goodness), and sending even the very strong Small Caps plunging to new lows for the correction.
However, even this attack and stealthy war can't change the course of the economy long term and the market showed its true colors last week, rising sharply higher. The rise not only did not change the minds of the bears, it gave them the idea that this would be a great place to do some additional short selling. Our opinion is that they may very well win this battle over the next couple of weeks (we could very well see a retest of the September 21 low, or even a lower low on some weaker indices), but they're going to lose the war, along with bin Laden. If the bears / bin Laden win, the viability of the US is not something we'd wish to speculate about. But, for the short term, Money Flow hasn't confirmed the viability of this short term rally, and that's ominous for the next fortnight.
Long Term.
Strong stocks are bouncing right back as investors see tremendous long term bargains on the table. Clear heads (the bulls) will eventually prevail over hysterical ones (the bears and bin Laden). And, from a cycle perspective, the market has a clear shot at a two-year uptrend from here. Thus, we continue to put new cash to work on dips for a rise in the ``market'' independent of the expected superior gains in individual stocks. While we don't require the ``market'' to rise, such a rise would obviously help float our boats that much higher.
The chart to the right of the Weekly MidCap shows that the panic selloff bounced right off that long term uptrend support line from 1994-1998. There is a Time Ratio Low which could cause a retest of that support, and even a lower low. That TR Low is due, you guessed it, October 19, 2001, the 14th anniversary of the 1987 Crash Day, Black Monday!
A Note on Moving Averages
Traditionally, moving averages have been plotted incorrectly (i.e., out of phase) from a technical point of view. For instance, when a 20-day moving average is plotted, the last point on the curve is typically plotted on the same day as the last price on the chart. That's wrong, but we've adhered to this unscientific convention because the crowd expects that kind of pseudo-scientific treatment of moving averages — until now, that is.For a simple (unweighted) moving average, the last point on a 20-day moving average should be plotted 10 days back due to the 50% lag time imposed within the moving average calculation (technically, the moving average acts as a low-pass filter, and all filters impose a time lag on their output). For an exponential moving average, the lag is less, on the order of 25%. Starting Monday, we'll plot our moving averages on the charts correctly, as they should be plotted, taking into consideration the lag time of the filter. It's important to realize that the process of creating a moving average creates a lag between current market prices and the moving average curve. From now on, the charts will reflect that inescapable lag.
To plot a moving average right up to the last price bar, one would have to know future prices with certainty. Of course, if one knows future prices already, why would one bother with moving averages at all?
U.S. Dollar Index:
The next week should tell the tale for the Dollar Index. This is the timeframe for a low (the first Time Ratio Low is due on the 4th). Now, here, we're talking about a trading low, not a long term low. The evidence suggests that the US Dollar has put in a long term top. However, these topping patterns can easily turn into broad topping patterns (especially if the US continues to hold together the coalition in this war) and a retest of the prior highs cannot be ruled out — yet. Most probable direction is down on the very short term, with a rally taking the Index back to test the old resistance lines that formed a ceiling back in July. The red resistance line has a lot of history behind it, having turned the Index back on numerous occasions. The Index briefly punctured that line during early July, but quickly topped out and plunged back through it, so we'd expect it to still present substantial resistance to the coming rally.Australian Dollar:
Consolidation last week just delays the inevitable, further decline. A minimum drop to 47.93¢ is expected, with further declines to 45.68¢, 44.30¢ and, ultimately, 42.05¢ possible.Canadian Dollar:
We haven't mentioned the Canadian Dollar much recently, simply because it's been doing exactly what we expected it would do: decline. Right now, it looks to continue that pattern, but should be showing signs of a bottom before too much longer.Australian All Ordinaries:
The break in the long term support line, which was valid from 1982-2001 and shown in yellow on the chart, increases the probability that the market will rally back up to test it as a resistance line. Right now that line is at 3162.43 and rising by about a point per day. We suspect that a rally to 3300 is in the cards, but that rally is probably not something one would play until the recent low of 2828 is retested. For investors in currencies other than the A$, the continuing downtrend in the Aussie Dollar should reverse and turn up before you attempt further investment in the Aussie sharemarket for the next rally. We're estimating the low in the All-Ords should come sometime in November.Australia Business News
Yahoo! Full Coverage of the Australian Economy
London Financial-Times 100:
There's a cycle low due around the middle of October (October 19th, to be exact). That date should present some weakness and a possible retest of the panic low of late September. We're very close to a long term bottom, however, and machinations on the part of powerful political and financial influences could easily override the technical picture.Bonds / Interest Rates:
The long bond (see December 2001 T-Bond Futures(http://www.marketclues.net/cgi-bin/myclues?chart=/:/indices/d/_tnx.4903.html): 10-Year Treasury Note Rates
Target 2025 Zero Coupon Bond Fund Quote (http://www.americancentury.com/funds/fund_facts.jsp?fund=968)
Bond Page at Open Directory Project (http://dmoz.org/Business/Investing/Stocks_and_Bonds/Bonds/)
Michelle Girard's Treasury Market Update (http://www.prusec.com/market_news/treasury.htm)
Sectors and Individual Stocks (Subscribers Only)
For tables ranking sectors and individual stocks, and links to charts of 3500 individual stocks and sectors, please visit your very own MyClues Home PageFor a 1-2 month free trial subscription, click here.
Commodities (Subscribers Only)
Commodity News Summary (http://www.ctrader.net/)
For complete charts of commodities, please visit your very own MyClues Home Page
- Daily Indices, charts of sector and popular stock and bond market indices on a daily basis
- Quarter-Hourly Indices, charts of selected indices on a 15-minute basis
- Daily Futures, charts of futures markets on a daily basis
- Quarter-Hourly Futures, charts of those same futures markets on a 15-minute basis
For a 1-2 month free trial subscription, click here.
CRB Index:
The CRB index sank again to the neighborhood around that strong red downtrend curve in the chart last week. That tells us that while the base-building process may still be underway, we're some time away from the completion of that process.
