DAILY TECHNICAL MARKET COMMENT

By: Larry Katz

January 10, 2001

	DJIA	S&P 500
Support	9450-9500, 9000-9050	1205-1214, 1155-1166
Resistance	11,000-11,050 11,750-11,850	1450-1455, 1550-1570
Short Term	Neutral	Neutral
Medium Term	Neutral	Neutral
Long Term	Bear	Bear

Indicator	01/09/01	01/08/01	01/05/01	01/04/01	01/03/01
Breadth oscillator	+463	+543	+561	+510	+491
Volume oscillator	+46.5	+98.7	+117.1	+98	+102.6
A/D ratio	1.56	1.66	1.68	1.65	1.64
Three day oscillator	+247	+154	+37	+492	+796
McClellan oscillator	+93	+96	+103	+149	+168
Open 10 day Arms	1.27	1.23	1.21	1.21	1.17
10 Day Arms	1.35	1.30	1.28	1.28	1.26
CBOE P/C ratio	.89	.64	.63	.55	.48
OEX P/C ratio	.42	.92	.71	.83	.56
New highs	165*	54	60	135	125
New lows	14*	15	8	5	30

*These are preliminary numbers and will be adjusted tomorrow

The DJIA lost 49 points while the S&P gained 5 points. Volume was 1.2 billion shares, up slightly from Monday. The A/D line added about 350 units. The new highs contracted and the new lows did likewise. The Russell 2000 gained 2.31 points. I am neutral for both the short and medium-term. The Value-line gained 7.23 points. The short and medium-term is neutral but also improving. The NASDAQ Composite gained 45 points and the NASDAQ 100 added 30 points. However, they both closed well off their session peaks and slightly below the middle of the days range. The DJTA lost 73 points. It is still very overbought short-term so further weakness should not come as a surprise. I am neutral short-term and bullish medium-term. The DJUA and UTY closed lower. They are still very oversold short term and could rally further. I am holding to a neutral view short-term. The medium-term is negative. Long-term I am neutral but a top is close to being confirmed.

The rally yesterday on the S&P took prices above Monday’s high confirming the decline from last week as a completed wave on the daily chart. That decline as discussed yesterday can be counted as a five on the hourly chart and until proven otherwise we have to respect it as such and approach the current rally as a correction of that decline. It is possible that what we saw yesterday was it as far as the rally but it is more likely that the rally and subsequent decline were waves “a” and ‘b” of a larger three wave pattern. This should allow for a “c” wave to carry the S&P closer to resistance. The DJIA held below Monday’s low and as such nothing was confirmed by the daily chart. The hourly chart from last weeks high into Monday’s low can be counted as a completed five, but until the daily chart confirms an extension cannot be ruled out. The NASDAQ 100 still best counts as a five-wave decline into Monday’s low as shown yesterday. The NDX did move above Monday’s high confirming that wave as complete on the daily chart. As is the case with the S&P it is possible that the rally yesterday was it but it is more likely that this rally was only the “a” wave of a larger pattern. Support: S&P; 1288-1290, 1250-1254, 1200-1204, DJIA; 10,500-10,520, 10,180-10,200, NDX; 2225-2232, 2050-2062. Resistance: S&P; 1322-1324, 1330-1332, DJIA; 10,710-10,720, 10,830-10,844, NDX; 2395-2407, 2475-2485.

For the first time in a very long time the DJIA took a back seat and lagged the S&P and technology heavy NASDAQ averages as it closed lower while the latter closed higher. However, in spite of the higher close the S&P still closed poorly and well off its best peak set mid session and in fact closed closer to the lows of the day. The last hour was a non event and was flat. Volume picked up slightly over Monday but not enough as to be of any help and is neutral to slightly negative. Breadth was positive. It was not great but was good. The new highs, on a preliminary basis eased from Monday failing to confirm the higher prices. This is a warning signal but nothing serious at least not yet.

The CBOE put to call ratio moved higher. It is neutral but Ok for the very near-term. The OEX ratio was once again very low and bearish. The Rydex ratio is neutral but does have some room before turning negative. However. The asset levels in both Ursa and Arktos remain a big problem. The breadth oscillator is still very overbought but is beginning to ease. The volume oscillator is neutral but closer to overbought. The 3-day oscillator remains on a short-term sell signal. The McClellan oscillator is still close to overbought and still on a divergent short-term sell signal. It also had a minor net change yesterday of around 3 points and that usually implies that a big move short-term is close at hand. The 10-day and open 10-day arms moved higher and deeper into oversold territory. They are bullish. The 5-day and 21-day Arms are also oversold and bullish. The daily range oscillators are neutral. The daily trend oscillators are neutral on the S&P but close to going negative. They have turned down on the DJIA.

Over the past several weeks there have been a number of occasions in which the DJIA lagged as it did yesterday. Each of those previous occasions the relative strength shift was very short-lived and within a day or two the DJIA moved back to the head of the class. I do believe that we are getting closer to a time when this shift will be more than a one day wonder but at this point it is way too early to tell whether that shift is here or down the road a piece. We did get some follow-through to Monday’s late surge as expected but the end result was disappointing as the averages could not hold onto their early morning gains and closed closer to the lows. Technically nothing has changed from yesterday. The market is still buffeted by a very mixed picture with some indicators such as the Arms indexes very bullish while others such as the breadth oscillator just turning down from very overbought levels and in need of some correction. On a very short-term basis it is possible that what we saw yesterday was it but it is more likely that the rally from Monday while so far not very impressive has further to run and a move above yesterday’s high is my expectation at this time. Yesterday’s comments sums it up nicely “, in spite of all the positives there are still a lot of concerns and while I may miss a good rally I am going to remain neutral for the short-term. Medium-term we may be getting closer but it looks to me like there is still some work to do and I am going to remain neutral. Long-term I remain bearish. “. The bonds moved lower but rallied back on late weakness in stocks. Nothing has changed a top is in development and I remain bearish both short and medium-term. The XAU moved lower. The short-term correction does not look complete and lower prices to complete wave 2 or “b” is still expected. I am neutral short-term. Once the correction is complete a “c” or third wave is expected to carry prices well above the mid December peak. I remain bullish on both a short and medium-term basis.

Stock index futures traders are flat. Stand aside for the morning. Rydex switchers are holding a 20% Ursa and 40% Precious Metals position. Make sure to call the Noon Pacific hotline for any changes.