Last Signal: 3/24/00, SELL Dow: 11,112.72 OTC: 4963.68
The ratio continued lower last week after making a lower high. The moving averages are following lower after last week’s bearish crossover as the shorter term one dropped below the longer term. Rallies should remain narrow, short lived and should be used for selling. With our indicators overall bearish and mostly NOT oversold, we see room for further price declines.
TUESDAY, April 25, 2000: There was not much to change our overall outlook since last Friday, with the exception of the rumors surrounding the potential recommendation that the Justice Department may seek to break up Microsoft into three separate companies, just as MSFT had reported their earnings about as expected on "disappointing" revenues. The combo was taken as a punch in the nose, dropping this NASDAQ -AND- DOW stock 12 5/16 for the day, accounting for much of yesterday’s losses. Because little else has changed during the holiday weekend, we will paraphrase last week’s report, updating support and resistance.
The recently dramatic volatility has been directly related to the abrupt reversal of records in Wall Street speculation with trading unprofitable stocks in margin accounts, mutual fund inflows, IPO’s that were recently rushed into the market, and insider selling that came as the "lock up" periods that had restricted insiders from dumping their holdings ended (with more ending every day!). Combined with the end of the seasonally bullish period between 11/1 and 4/15 and a tight monetary policy that has yet to slow the economy and we see further risk ahead. The simple minded media remains "confused", still questioning if this is a "bear market" or just a correction, and ADVISING their audience to continue holding and buy into it. Why not? This has been the strategy that has worked until now. Instead of their simplistic and deceiving definition that a bear market is simply a 20% decline, they would be much more astutely accurate by reporting that the markets have continued making "lower" highs and lows for some time now, a sure sign of a bear market based on OUR definition of it.
Technically, our indicators remain overall bearish and NOT oversold. Our 10 day A/D Line indicator remains modestly bearish, indicating that even on the choppy rallies, there is little buying conviction but plenty of selling into rally attempts. Next resistance is at 10,960 - 11,000, then at 11,200 and 11,420. Our Elliott view suggests that the Dow is completing intermediate wave 2 of primary wave (3) down. If this is so, an ultimate decline will take prices to lows that exceed the 9732, March low. Support begins at 10,640. An "hourly" close of 10,550 or lower would be an initial signal that the short term trend has topped, and a break of support at 10,200 would indicate that prices are on their way to a new low. Resistance is at 11,100, 11,200 and then at 11,420. 10,400 and then at Friday’s 10,201 low, near 10,000 and then near the 9732 March low.
TREASURIES
Treasury yields have bounced after first reaching our 5.72% objective on 4/7, and then abruptly reversing higher. We remain cautious on bonds from that date and hope that prices will back up to at least the support that confined the last selling to 6.20%. This seems a bit more possible after last week’s selling of equities did surprisingly little to draw the safe haven Treasury buying that usually accompanies panic and mayhem on Wall Street. This may be due to renewed fear that the Fed will get more aggressive at their May 16 FOMC meeting. We think that if they do, it could be the last tightening they will need for a while. The yield closed right on our sighted initial support at 5.85% yesterday, with 6.00 - 6.05% next, and then 6.20%, 6.32%, and 6.40%. Resistance is at 5.85%, 5.72% and 5.65%. We think the next level to be challenged will be to the upside, as the fear of the Fed has returned.
GOLD
The XAU & Gold continue to do little but hold their own at current levels after the XAU had a major selling climax (SC) by making a 52 week low before closing the week higher a week ago, along with major producers, Barrick Gold, Homestake Mines and Placer Dome Mines. While prices have yet to prove themselves on the upside, I think the next move of significance will be UP, even in the presence of Bank of England (BOE) and now Swiss National Bank (SNB) planned sales, as much of this should be discounted by the markets and little if any will likely hit the actual market. Support is at last weeks 54.24 low and then at the 48.73 all time low reached on 8/31/98. Resistance remains at 57 - 59, 64, 69 and 72 -3. A break above 60 would offer encouragement for the bulls.
NOTE: Some of our price objectives have been reached in recent days including our stated initial upside objective for the Transportation Average at the 2848 Fibonnacci 38.2% resistance, the OTC Composite has corrected by 29%, more than 1.5 times the 17% top to bottom YTD decline for Dow, as we had expected in our January "Forecast 2000 Report". At the same time, the Dow has satisfied all of our Fibonnacci and price resistance levels on the upside within our Elliott Wave expectations within the intermediate and cycle degree wave (2) bear market retracement. It MAY be waiting for the other markets to catch up before beginning its wave (3) decline that would likely eventually take the index BELOW the 9731 bottom. If this is correct, "you ain’t seen nothin’ yet!!" Crude Oil futures have quickly retreated to our initial downside objective by touching a low of $25.11 per barrel and lower this into this week, and Treasury yields slightly exceeded our downside objective [at the Fibonnacci 50% retracement resistance at 5.72%], reaching 5.65% intraday during Tuesdays pandemonium.
PORTFOLIO CHANGES
Tuesday, April
25, 2000: NONE
Article contributed by Mitch Harris: President, Market Trend Realities & Editor,
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