DAILY TECHNICAL MARKET COMMENT

By: Larry Katz

February 8, 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	Bear	Bear
Medium Term	Neutral	Bear
Long Term	Bear	Bear

Indicator	02/07/2001	2/06/2001	02/05/2001	02/02/2001	02/01/2001
Breadth oscillator	+275	+262	+344	+364	+363
Volume oscillator	+49.7	+80.2	+128	+131.6	+133.3
A/D ratio	1.22	1.21	1.32	1.34	1.33
Three day oscillator	+172	+185	+104	+40	+412
McClellan oscillator	+11	+18	+20	+28	+67
Open 10 day Arms	1.09	1.01	.99	1.00	1.01
10 Day Arms	1.12	1.04	1.02	1.03	1.01
CBOE P/C ratio	.58	.71	.54	.60	.53
OEX P/C ratio	.79	1.47	1.50	.97	1.17
New highs	184*	110	106	112	124
New lows	19*	6	9	3	3

*These are preliminary numbers and will be adjusted tomorrow

The DJIA lost 10 points and the S&P lost over 11 points. Volume on the NYSE totaled 1.13 billion shares, which was up a bit from Tuesday. The A/D line added about 150 units. The new highs were about flat while the new lows expanded. The Russell 2000 gained 1.32 points. The short-term is neutral but close to going negative. The medium-term is slightly positive. The Value-line lost 1.41 points but did close off its low. The short-term is negative. The medium-term is slightly positive. The NASDAQ Composite lost 56 points and the NASDAQ 100 lost 63 points. Both closed off their lows of the day but still poor. They are negative both short and medium-term. The DJTA lost 27 points. The short-term is back to bearish. The medium-term is positive but fading. The DJUA and UTY closed higher but well off their highs. The short-term remains neutral. The medium and long-term are negative.

The S&P stopped right at a .383 retracment of the rally from the December 21 low and not far from a 50% retracement of the rally from January 8. The decline from Tuesday carried too far to be a “b” wave of an irregular from Monday. That said it is either a third of a third from January 31 or a “c” wave from that same high. At this point it is too early to tell and also too early to tell if yesterday completed all of that decline or just part of it. There decline did come close to equality with the decline from last Friday to Monday but there is no real Fibonacci relationship between yesterday’s decline and the January 31 to February 5 decline. Given the support zone that held some further rally may be in store for the S&P and the nature of that rally will be important to the count. A move below yesterday’s low would be a sign that the post February 6 decline was extending. The DJIA held above Tuesday’s low keeping the daily chart from Monday positive. The hourly chart is difficult and the pattern very short-term is not clear. The DJIA can be counted as having completed five waves up from January 22 on the daily chart but still shows a seven-wave or corrective pattern from January 12. This leaves open the possibility that a small fourth and fifth wave may be in store to complete a five on the DJIA from January 12. The action yesterday may in fact have been that small fourth. The NDX low yesterday was right near a .618 retracement of the rally from January 3. This was also the area where yesterday’s decline was .618 the length of the decline from January 31 to February 5. The decline yesterday may be counted as all of a “c” wave from January 24 but the Fibonacci relationships do not support this, making it morel likely the rally was either part of wave “c” or part of wave .3 of 3. How we do today will be a big help in determining the count. Support S&P; 1330-1334, 1316-1319, DJIA; 10,837-10,845, 10,710-10,722, NDX 2330-2340, 2250-2260. Resistance: S&P; 1345-1346, 1355-1357, 1364-1366, DJIA; 11,000-11,050, 11,100-11,125, NDX; 2460-2467, 2506-2515.

The market was mixed but on balance lower with the DJIA continuing to hold up better than the tech heavy S&P. However, even the broad based NYSE Composite was weaker than the DJIA yesterday and by a long shot. The market did rally late in the session and that helped to cut the losses but the S&P was still closer to the days low than high. The NASDAQ averages closed a little better than mid range. Volume expanded a bit on the day. It was not close to levels that would indicate any sort of give up and in fact was close to the levels seen over the past several days but it as enough to confirm the price behavior. Breadth was positive and continues to act far better than the averages. The new highs were about in line with Tuesday. Given that prices were lower most of the day this is a minor plus but we did get a decent expansion in the new lows. The absolute level was not a problem and remains low but the sharp increase is a conformation short-term.

The CBOE put to call ratio, which improved on Tuesday moved down sharply yesterday and was quite negative. The OEX ratio also moved lower and was well below 1.00. The Rydex ratio improved a bit from last week bearish level but is nowhere close to levels suggestive of a bottom and remain negative. The breadth oscillator is neutral but close to overbought and remains on a sell signal. The volume oscillator is neutral but still on a sell signal. The 3-day oscillator moved a little higher. It is weak and remains on a sell signal. The McClellan oscillator moved lower. It is neutral and still above zero and remains on a sell signal. The 10-day and open 10-day Arms moved higher and are back to oversold. The 5-day Arms is neutral as is the 21-day Arms. The daily range oscillators are neutral but weak on the S&P and OK on the DJIA. The daily trend oscillators are negative on the S&P and positive on the DJIA. They are also negative on the NDX.

The markets ability to rebound late in the day could allow for a bit of follow-through buying early today. The S&P and the NASDAQ averages also held some important short-term support. The drop in the put to call ratios yesterday was in my view a big negative and continues to reflect a high degree of complacency. The 10-day moving average of the CBOE put to call ratio is still negative and remains close to where it was at the early November peak. The Rydex ratios are just coming off their most negative levels since early November and are not close to levels that would support even a short-term low. In addition, Investors Intelligence reported another small increase in bulls to 61.8%. This is the highest level of bulls since January of 1987. Most of the momentum indicators remain negative and have a long way to go before becoming even remotely positive. In addition, the daily trend oscillators on both the S&P and NASDAQ are on fairly fresh sell signals. The one positive comes from the 10-day and open 10-day Arms, both of which are back to oversold levels. These are the only real positive indicators but they are important ones. There could very well be a rally. And it is possible to see the DJIA actually make another unconfirmed new high in the next day or two. However, the momentum and sentiment backdrop remain negative. Any rally in the S&P and NASDAQ should be viewed as only being related to the recent decline and nothing more. The sell signal short-term remains in place and I remain bearish. Medium-term I am going to stay neutral on the DJIA and bearish on both the S&P and NDX. Long-term I am bearish. The bonds were weaker than I would have expected given the weak equity market as they usually rally when stocks are lower. I am going to stay neutral on both the short and medium-term. The XAU traced out a minor reversal pattern after moving to new post December 15 lows. There is a possibility of one more modest new low towards important support just above the 46 level but it looks possible that the correction is over. I am moving back to bullish on the short-term and remain bullish on the medium and long-term.

We are holding a ½ short position in the QQQ’s from 65 5/8 having covered ½ on Monday for a 5.02 point gain. They closed yesterday at 60.60. The stop was lowered to 63.20. Make sure to call the early morning hotline at 7:45 AM pacific for any changes.

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.