DAILY TECHNICAL MARKET COMMENT

 

By: Larry Katz

February 16, 2000

 

	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	02/15/2001	02/14/2001	02/13/2001	02/12/2001	02/09/2001
Breadth oscillator	+56	+72	+146	+194	+194
Volume oscillator	-36.7	-42.2	-27.6	+18.9	+12.8
A/D ratio	1.07	1.08	1.13	1.17	1.17
Three day oscillator	+63	-59	+230	+326	-146
McClellan oscillator	-35	-38	-10	-5	-38
Open 10 day Arms	1.10	1.13	1.16	1.09	1.10
10 Day Arms	1.14	1.15	1.18	1.12	1.13
CBOE P/C ratio	.64	.73	.74	.64	.73
OEX P/C ratio	.74	1.11	.83	.76	1.23
New highs	159*	92	133	117	91
New lows	15*	20	14	9	9

*These are preliminary numbers and will be adjusted tomorrow

 

The DJIA gained 95 points and the S&P added 10.69 points. Volume was 1.11 billion shares and about where it has been for the past several days. The A/D line added about 200 units. The new highs eased slightly and the new lows eased as well. The Russell 2000 gained 5.36 points. I am neutral short-term. The medium-term is slightly positive. The Value-line gained 12.43 points. The short-term is neutral. The medium-term is slightly positive. The NASDAQ Composite gained 61.52 points and the NASDAQ 100 added 65 points. In spite of the solid price gains both closed much closer to the days low than high. The short-term is neutral as is the medium-term. The DJTA gained 43 points. The short-term is negative. The medium-term is neutral. The DJUA and UTY closed modestly lower. The short-term is neutral. The medium and long-term is negative.

 

The S&P stopped between first and second resistance levels and from a Fibonacci perspective gave us very little help. It has not yet moved close to a .618 retracement of the post February 6 decline and that leaves open the possibility that the rally is directly related to that decline and not the entire post January 31 pattern.  Price structure also is of little help other than the fact that the S&P did confirm the decline from Tuesday to Wednesday as a completed wave on the daily chart. The 1300-1303 level remains important support and as long as the S&P holds above that support level we should favor higher prices with the idea that the current rally is part of a bigger pattern. Whether the rally is correcting the post February 6 decline or the entire pattern from January 31 is another matter. So far the S&P has not come close to a .618 retracement of the February 6 decline so at this point it is rather moot. The DJIA moved right into initial resistance and sold off modestly. It did hold above last weeks low and that keeps open the possibility that the pattern from February 6 is a fourth wave triangle from January 12. If correct we have either completed or are close to completing wave “c” of that pattern. This would argue for more sideways action before a final thrust above the recent high. A move below yesterday’s low would question this count and a move below last weeks low, which was not far from yesterday’s low would invalidate it. The NDX moved above the .618 retracement of the decline from February 6 by a wide enough margin to support the idea that it is correcting the entire post January 24 decline.  The hourly chart from Wednesday can be counted as a five. This five may be counted as a “c” wave of an irregular from February 12 but is more likely the first wave of a larger pattern and supports the idea that the NDX is correcting the entire decline from January 24. Keep in mind though that the rally from Wednesday has not been confirmed as complete on the daily chart so while we do have a five it could very well turn into a seven or corrective pattern. A move below yesterday’s low would confirm on the daily chart and add a lot of weight to the idea that a further rally is expected. Support: S&P; 1320-1321, 1313-1315, 1300-1303, DJIA; 10,830-10,838, 10,756, NDX; 2329-2335, 2270-2277. Resistance: S&P 1334-1335, 1341.1343, 1354.1357, DJIA, 10,922-10,930, 11,000-11,050, NDX; 2470-2478, 2544-2552.

 

The DJIA was able to nap back and recover most of Wednesday’s losses while the S&P showed decent follow-through behavior following Wednesday’s modest reversal. The NASDAQ averages closed higher as they also showed good follow-through to Wednesday’s reversal pattern. We did get a bit of weakness late in the day. It was not much but in the case of the NASDAQ averages it put them close to the days low with neither showing much on the upside from the gap higher opening. Volume was about flat and remains neutral to slightly negative. Breadth was positive but did at least when compared to the DJIA or the S&P lag badly. When compared to the NYSE Composite it was OK, but the NYSE Composite itself lagged badly as it gained only 1/3 as much as the S&P or the DJIA. The new highs contracted a bit from Wednesday and continue to diverge from their late December-early January levels. The new lows eased a bit but were higher than what we have seen in a while.

 

The CBOE put to call ratio eased a bit and was slightly but not excessively negative. The OEX ratio moved down sharply and was quite negative. The Rydex ratio is OK and could support further rally on a near-term basis but has not yet moved to levels that are consistent with good trading lows. The breadth and volume oscillators have continued to correct and are neutral. They could support a bounce but have not yet turned positive. The 3-day oscillator is neutral. The McClellan oscillator is neutral and still below zero. It did have a very minor change yesterday suggesting that a big move on a very short-term basis is close. The 10-day and open 10-day Arms moved lower but are still oversold and positive. The 5 and 21-day Arms are neutral but the latter is closer to oversold. The daily range oscillators are neutral. The daily trend oscillators are negative on the DJIA, S&P and NDX.

 

The averages did OK yesterday and the DJIA recouped nearly all of the previous days loss. The close on the NASDAQ averages, however, was not great as they ended a lot closer to their lows. They also left a nice sized gap on the daily and hourly charts. It is not, in my view a coincidence that the gap is also very close to a Fibonacci .618 retracement of the rally from Wednesday. Volume flows remain mediocre and breadth yesterday while positive was also not nearly what we have been used to over the past several weeks and lagged badly. This tends to happen in times when the technology sector is leading. And that has been the case for the past two sessions. Most of the momentum indicators are neutral. The breadth and volume related indicators can support a rally but are not in a position to suggest anything important, and they look to need more time to correct the excesses from early January This is particularly true of the McClellan oscillator and the summation index. Short-term sentiment indicators such as the CBOE put to call ratio and the Rydex ratios are also in the position to support a rally but neither have come close to levels seen at other important trading lows.  There is enough between the wave structure, Fibonacci price relationships, momentum and short-term sentiment to expect that the rally from Wednesday is not over and that we should see further gains. At the same time, I do not see enough, even short-term to support the idea that Wednesday was anything more than a very short-term development. As such I am going to remain neutral on the short and medium-term for the DJIA, S&P and NDX. Long-term I remain bearish. Bonds were hit hard yesterday. They are still above their January 25 low but did break important support related to the January 25 rally. The weekly momentum indicators have turned over and are negative. I am moving to negative from neutral on the medium-term. Short-term indicators are also negative but oversold enough to allow for a bounce so for now I will stay neutral. The XAU is holding where it needs to hold to remain positive but we have to see it begin to move up from here real soon. I am neutral short-term. Medium and long-term I remain bullish but that could change at any time so stay in touch.

 

We can buy a 50% position in the QQQ’s at 57.60 or better early today provided that they have not moved above 60.50 first. They closed Thursday at 58.40. If elected use a stop of 54.00. 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.