Last Signal: 11/10/00, SELL
Dow: 10,602.95 OTC: 3029.10
The “other bout of selling” we were expecting since last Tuesday was quick to emerge. Surprisingly, the ratio has only sipped a bit lower and remains bearish, but is within striking distance of reaching an oversold level, perhaps in the next week or so. At some point, we will be looking for a year end rally to begin that should offer a better trading/selling opportunity for beyond it. The lower the market goes, the more tempting it gets, but it seems to us that this is a time to adhere to a strict trading discipline, as the temptation must be resisted in favor of objectivity. Note: We do not plan to issue a Friday Morning Update due to the Thanksgiving holiday. We wish you a happy, safe long holiday weekend!!
TUESDAY, November 21, 2000: Florida’s Supreme Court was hearing both sides of the post-election crybabies stories yesterday, and it appeared that the markets were unnerved by its softer attitude toward Gore’s representation. Of course, once this is resolved there will be something else to worry about!! Perhaps the fate of America’s next four years could best be decided by….Judge JUDY!!
Friday’s bearish “outside day” on the Dow lead to yesterday’s steep downside acceleration. This occurs when a price trades above the high of the last trading period before reversing to close below the low of the last trading period. Friday’s high was 5 points above Thursday’s, before closing almost 10 points below Thursday’s low. This is a fairly rare technical event that indicates the short term trend has reversed.
The OTC Composite continued to carve out another new low for the year, clearing the psychological 3000 level ballyhooed by the media. It is now down <-29.33%> from its December 31, 1999, 4069.28 closing level. Even more dramatic, it is down <-45.59%> from its 3/10, 5132.52 intraday high! Even as this continues hemorrhaging green , there are still plenty of “top rated” wall street strategists, analysts and technicians that unheedingly define the long term trend as bullish!! You should believe that if they represented my own broker, I’d be on the phone with someone at their company with something unpleasant to say (Look for the lawsuits to start to proliferate)! In our January 22, Forecast 2000 issue, we expected “minimum” decline of 17-20% from the DJIA’s highs, 22-25% for the S&P, and “at least” a 32% decline for the OTC Composite, stating (this would erase the record gain of the past 2 1/’2 months).” For the NASDAQ, this is between 2500-2700. Yesterday’s big drop to 2875.64 is getting it close, and will have completely unwound the entire OTC “blow-off” phase, something else we predicted with confidence.
Short term, some of our trading indicators are becoming oversold, but not all of them. Overall, we cannot yet say that selling conditions are becoming washed out. We’ll leave the javelin catching to those that enjoy multiple full body piercings! WE DON’T!
From the November 6 highs, the market appears to be accelerating within its larger, 3rd primary wave of decline within the bear market. If this remains correct, there should still be a LONG WAY DOWN!!! At an absolute minimum, prices should fall below the lows reached on 10/18, when the Dow bottomed at 9654. As stated on Friday, we have introduced in this month’s issue of the Reality Check Newsletter, a cluster of Fibonnacci support that we are forecasting as a downside target. The Dow is closing in on key support at 10,369, from last Monday’s (11/13) low. A clear break of this level will confirm that primary degree wave (3) is indeed underway, indicating a test of the 10/18, 9654 low was on its way. Short term resistance is found at between 10,790 to 10,870, with more at 11,000 - 27 (Fibonnacci .618 retracement resistance of 11,407 high to 9654 low). A push above 11,050 would confirm a more complex, double zig zag corrective rally toward next major resistance at 11,400 or so. We think that before an extended bear market will end, the A/D Line will have likely seen its low AHEAD of market prices, as many stocks generally see their lows before the overall market. This is how leadership develops ahead of the next bullish move, and we still don’t see that yet. To receive a sample issue, please email us your request, including your name, address & phone (We apologize, but we are not set up to email our morning updates as part of our sample and reserve this service for our subscribers The Tuesday and Friday updates are available for free at more than 30 financial websites, making it very easy to obtain already)!
TREASURIES
Treasury yields may be benefiting slightly from a flight to safety bid, but we are not impressed by it as investors are not seeking safe havens to any greatly noticeable degree. In itself, this is a sign that bullish sentiment has not shifted and equity investors have yet to be spooked. This morning’s shockingly high Merchandise Trade Deficit Exploded to another all time high, +$34.26 billion. Last month it slipped to $29.4 billion vs. $31.69 billion in July. This rebound is not good for bonds or the dollar, because as it goes higher it puts more pressure on foreign investors to repatriate their capital away from the US. The problem is that it is difficult to know when this might begin to show up. Perhaps, a noticeable decline in the dollar will produce a reversal, and technically, the dollar may be about ready to resume its intermediate term decline. The yield remains stuck within our previously defined range, between 5.925% and 6.725%. A break out of this range will point the next direction, with 5.65%-.675% and then 5.50% the next levels of resistance and Initial support is back down to 5.85%, then layered, beginning at last Wednesday’s 5.925% high, 5.97%, 6.05%, 6.20%, 6.32%, 6.40%,
GOLD
Gold & the XAU continues biding their time ahead of the next news related move. The question remains, will that move be up or down. The lack of interest in light of the extreme uncertainties surrounding the US market’s and our future president is not a very good sign for the short term, but there is an old saying, “never short a dull market”! Looking at the most recent Commitment of Traders (COT) data suggests that speculators are doing just that. This may prove to be a big mistake. We see signs emerging that a bottom may not be far off. The Investors Intelligence [(914) 632-0422], precious metals group bullish percentage is down to a VERY oversold 10% and sentiment among futures traders below 20%, conditions remain good for a strong rebound. Support remains at the 41.64 low, and then between 40 - 37. A push to 49 on our 1 X 3 P&F chart will be a “Low Pole” (LP) buy alert, but a rally above the 55-6 level of resistance is still needed to turn the short term trend bullish. Higher resistance is at 59, then at 64, and 69.
PORTFOLIO CHANGES
Tuesday, November 21, 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
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