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REALITY
CHECK UPDATE
Published Every Tuesday
and Friday |
| ARCHIVE:
APRIL
2000-MAY
2001 |
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Contributed by
Mitch Harris
President: Market
Trend Realities,
Editor: The Reality Check
Newsletter |
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July 24, 2001 |
| STOCKS |
| REALITY RATIO: +0.29
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Last Signal: 06/29/01, TRADING BUY
Dow: 10,499.72 OTC: 2159.60
The Reality Ratio line moved higher and so far and in spite of the churning market averages, this tells us that overall, the average stock is holding up relatively well compared to the averages. We continue to hope for an upside resolution to the volatile but still range-bound NY and OTC markets. If our indicators change, we will attempt to remain flexible enough to change with them. It s becoming a close call.
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TUESDAY, July 24, 2001: Slammed Again!! The Dow is down close to 200 points in the past two sessions, still over continued earnings disappointments and their lack of future visibility. Disappointments remain too much for the street, with about 1,600 companies reporting this week. Yesterday s shortfalls were lead by MMM, AT&T, Lexmark, and Colgate-Palmolive. Some 1600 companies are scheduled to report this week. Of the roughly 200 S&P components that have already reported, 60% were above expectations (albeit lowered expectations in many cases). 13% were below their forecast and 15% were below a year ago. This doesn t seem quite as bad as it feels.
If there was anything positive to take from yesterday s selloff, it was that it was on continued light volume as lower prices failed to attract buyers as the close approached. Perhaps buy side traders were on another extended weekend due to the heat scorched dog days of summer. Many of our short term trading indicators are struggling for a bottom from which they should attempt to rally prices. There s not a whole lot to add from Friday, so we re keeping it short.
Support at 10,400 is just beneath yesterday s close, with more near 10,300 and then at Wednesday s more critical 10,120 low. Longer term support is at 10,000, 9880, 9650, 9375 and at the 3/22, 9106 spike low. Resistance begins near 10,600-40. A push above this would confirm the short term low, with further resistance near 10,760 - 10,785, 11,000, 11,180, and the stiff longer term Dow resistance from the 5/22, 11,350 high. A push above this would confirm the beginning of the next leg of advance and greatly increase the odds that the 11,750 high will be tested, but this resolution is becoming less likely.
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TREASURIES
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Treasury yields look like they may be at or very near the end of their countertrend, bear market rally. Our daily "reciprocal" trading indicators, including Stochastics and RSI are turning up, with Stochastics at a VERY extreme overbought level. Perhaps a stronger than expected economic report or stock market upturn will be the catalyst for a return to rising yields. Whatever it may be, we see very limited remaining potential for bonds, especially with what should be stiff Fibonnacci resistance near the 5.48% level. Even if the rally extends Itself further, we think it remains unlikely that it will push beyond the 5.40% bearish reversal point from late March (That is, unless the market mayhem gets worse).
At the 5.567% low, the Treasury yield retraced an exact Fibonnacci 50% from the 5.217%, 4/22 low to the 5/15, 5.90% high. This is a typical retracement in a bear market. Next Fibonnacci resistance, at the .618 retracement is at 5.48%. Below that, there is significant yield and Fib resistance between the 5.40% key level and 5.36% ( with the Fib. .786 resistance at 5.363%). An upturn above the last high at 5.90% would ultimately confirm the larger degree wave (3) bear market was well underway, making higher support at the 5.975-6.025% the next upside target for the bear. Shorter term, a reversal to 5.80% is currently needed to turn the trend bearish, giving it plenty of room. |
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GOLD
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Gold & the XAU have stalled in recent days, still below the 57 level needed for a Low Pole (LP) buy alert formation on our short term P&F Chart. This remains at the MINIMUM of what we need to see happen before thinking the market is becoming more constructive. Our trading indicators for the XAU are overall becoming extended and warn of a downturn. In this event, it will become imperative for the bullish case that prices do not fall beneath support from the 7/2, 51.30 low. If the next upturn were to emerge from above this level, it would offer a strong sign for encouragement, but we ll see what happens.
Again, a push to 57 would put our short term chart on a "low pole" buy alert and renew our immediate optimism. A push straight up to 61 would confirm the lower initial signal and bullishly resolve the longer term chart, but these numbers are still a long way off. Support remains near 51, at the key 2/14, 45.64 low, and then at the even more critical 7/14/00, 41.61 low. Higher resistance remains at the 5/18, 66.54 high. For gold itself, long term support near $254 remains vulnerable to the next challenge for the bears, with resistance beginning near $272.
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PORTFOLIO CHANGES |
Tuesday, July
24, 2001: 7/23: Our last short sale position, Baker Hughes (BHI) was covered yesterday at 33 (+12%), after it and many other oil service issues had selling climaxes last week, by closing higher after making 52 week lows (It should not come as a surprise if we were to reverse our bearish position on this group with the suggestion of a long position or two)!
[Part of our offensive is to have a good defense! That means limiting losses and protecting gains]! |
Article contributed by Mitch Harris: President, Market Trend Realities & Editor,
The Reality Check Newsletter, and reprinted here with permission.
Market Trend Realities (MTR) is a Registered Investment Advisory which manages personal, corporate, Trust, and retirement accounts on a fee only basis. Several low cost, flexible management fee arrangements are available. Investment Advisor, Mitch Harris has studied the Point & Figure Charting Method under the direct supervision of Michael Burke, Editor of the prestigious Investors Intelligence research organization. Management is based on a unique combination of technical analysis methods and tools which include, The Point & Figure charting method, Elliott Wave Analysis & techniques, industry group analysis, cycle analysis, Relative Strength Analysis, Stochastics, and investor sentiment studies. MTR offers a very uniquely structured managed mutual fund program using the RYDEX family of mutual funds, which offer outperformance potential whether equity markets are rising OR falling! Inquiries are welcome by calling us at
(513) 421-8737,
Fax: (513) 421-8733 , or by email at: mtr@fuse.net .
MTR also publishes a monthly investment newsletter called "Reality Check", which offers technical commentary on the stock & bond markets, the Dollar Index, gold & gold stocks (XAU), Treasury yields, utilities, investor sentiment, and Federal Reserve policy. It also offers stock trading recommendations each month with price targets, stop loss points and insider activity. There are 4 trading portfolios, including a short selling account (we are very proud that our short sale recommendations have averaged 12.5% "compounded" during the roaring bull market of the last 5 years). Short term market commentaries are updated on Tuesday and Friday mornings, along with portfolio changes on this web page. They are also emailed for free to anyone who provides us with their email address. The regular subscription rate is $200 (US) per year. Samples are available upon request. MTR will be happy to send information on any of the above mentioned services. Please email us your home or business address along with your daytime phone number and specify your interest(s). |
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