Last Signal: 7/14/00, SELL
Dow: 10,806.74 OTC: 4243.02
The ratio was unchanged last week but the moving averages continued lower and are also very close to reaching an oversold buy signal. The fact that they are all close but haven’t yet reached the minimum oversold -.40 reading makes the current rally difficult to assess, but so far, we think the rally will fail or at least come back down to test the lows of last week. Since the Friday, July 14th sell signal, the Dow moved a bit higher but the OTC Composite topped at 4289 on Monday, just 1 trading day later! Our Reality Ratio could not have been more timely!!! Our advise to sell into rallies was good, but this too is not as clear cut as it was.
TUESDAY, October 23, 2000: The recovery from last week’s climactic lows continues but we cannot conclude that it was a lasting bottom until we see whether or not a setback tests and holds those lows. It shouldn’t be long before we find this out.
Last week’s strong reversal after reaching new lows for the year on many market averages produced major selling climaxes on the Dow, NYSE, S&P 500, OEX, OTC Composite, NASDAQ 100 (NDX), S&P Midcap Average (MID), and the Biotech Index (BTK). A selling climax occurs when a price makes a 52 week low before closing higher for the week. The rally is being considered by many to be the end of the market’s trouble and the beginning of the year end rally, but we think investors may be way too eager to jump back in. An important part of the way we define a bear market is that peak investor optimism must be reversed to distrust and contempt for equities in general. Last week’s low was considered another “bull market” buying opportunity by way too many for the “cleansing” process of a bear market to have run its course. We think this process will take more time and far greater pain before investors throw in the towel and begin to understand that market risks are far greater than they were lead to believe. For now we will enjoy the moment, but we think the sellers will re-emerge, at least to test the recent lows.
Next minor resistance is at yesterday’s 10,361 high to 10,400. A 50% retracement of the recent decline [11,401 - 9654 = 1754 X .50 = 873 + 9654 (low) =10,527] where there is also reasonably strong price resistance. This makes it likely to be an area of congestion, where the bears may reappear. We think that the first opportunity to turn bullish for a bigger, longer lasting rally will be after the next sell-off, whether prices continue to new lows, or test the lows and hold before turning higher again. Initial support is at 10,220, with more near 10,000 and then at the 9654 low.
TREASURIES
Treasury yields accelerated their progress to lower yields yesterday, closing below 5.68% for the first time since early September, as traders covered short sales on worries over the economy, the mid-east, and the stock market. We thought this was going to happen, but gave up on it just a bit too soon. Perhaps the move we thought would materialize just took longer to develop than we had patience for, but our long term indicator remains on a sell signal and bearish. A return to panic in the equity markets would likely help bond yields decline further, toward the 5.50% level we had targeted before giving up on it. So, while we are not going to back track on our sell signal from last week, we are going back to a “neutral” opinion until we can reassess. Next resistance is at 5.65%, and then the targeted 5.50% level. Support is layered all the way up, beginning at 572%, 5.85%, 5.97%, 6.05%, 6.20%, 6.32%, 6.40%, and at the 6.75% January high.
GOLD
The XAU & Gold continued to find little or no interest among investors, a condition of complacency that remains a major reason to watch for signs that interest is picking up, because a shift in this historic complacency should be meaningful and long lasting. With our indicators very depressed and sentiment so extremely bearish, we think the next upturn should lead to something more significant than we’ve seen for many months. In fact, there is a tendency for gold to bottom during the 4th quarter of the year and top in mid summer, so we are keeping our fingers crossed and our eyes open. We can only continue to point out that both, technical and fundamental conditions surrounding gold seem very ripe for an explosive rally to begin at any time. This won’t really change until it begins.
The XAU continues to reach new lows, closing at 43.64 yesterday, for another all time low. A new low this week before a higher close would be a major selling climax, but this didn’t happen yet as of yesterday. This is still what we are looking for as a first sign that prices are trying to bottom. A move higher to 50 would be a Low Pole (LP) buy alert on our 1 X 3 P&F chart, but our sited point of initial resistance, at 55-6 is still needed to turn the short term trend bullish. Higher resistance is at 59, then at 64, and 69. Next support remains near 44, as prices had decisively broken support from the 8/31/98 low of 48.73. A new low in the Investors Intelligence [(914) 632-0422] Precious Metals Bullish percentage indicator lowered the point of confirmation for a bullish reversal, to 26%.
PORTFOLIO CHANGES
Tuesday, October 24, 2000: -- None Today --
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).
Copyright � 1998-2002 Tulips and Bears LLC.
All Rights Reserved. Republication of this material,
including posting to message boards or news groups,
without the prior written consent of Tulips and Bears LLC
is strictly prohibited. 'Tulips and Bears' is a registered trademark of
Tulips and Bears LLC
Last modified: April 01, 2001
Published By Tulips and Bears
LLC
