DAILY TECHNICAL MARKET COMMENT

By: Larry Katz

March 8, 2001

*These are preliminary numbers and will be adjusted tomorrow

The DJIA gained 138 points and the S&P added 8 points. Volume was about where it as on Tuesday coming in at 1.11 billion shares. The A/D line added about 800 units. The new highs expanded and the new lows were about flat. The Russell 2000 gained 3.71 points. The short-term is neutral but improving. The medium-term is neutral but weakening. The Value-line gained 8.92 points The short-term I neutral but also improving. The medium-term is neutral and weakening. The NASDAQ Composite gained 19 points and the NASDAQ 100 also gained 19 points. The short-term is neutral as is the medium-term but the medium-term is beginning to improve. The DJTA gained 10 points. The short-term is neutral. The medium-term is also neutral but close to going negative. The DJUA and UTY closed slightly higher. The short-term is neutral but close to completing a top. The medium and long-term are negative.

The S&P did not move below Tuesday’s low keeping the daily chart from last Thursdays low positive and that allows for the rally to extend. The pattern from last week remains corrective. As discussed yesterday, the rally from Friday may be counted as a second three of a double three from March 1. However, since the daily chart is still positive I cannot rule out the possibility that what we saw yesterday was part of a fourth wave from Friday that would allow for a move back above Tuesday’s high to complete a “c” wave of a flat as apposed to a double three. A move below yesterday’s low near 1253 would turn the daily chart down and confirm the rally from last week as complete. As long as the S&P remains below last weeks peak of 1272.76 my preferred count will remain the same that the rally from last weeks low is the “c” wave of a fourth wave triangle from late January. A move above that high will turn the weekly chart positive and confirm that the post January 31 decline is complete. The DJIA moved above last weeks high eliminating the possibility that it was in a triangle from February 23. The rally from last weeks low does not look impulsive as yet so it is hard to count the rally as a “c” wave from February 23. If it is part of the post February 23 rally then it is best counted as a second three of a double three with last weeks late low an “x” wave. Unlike the S&P, the DJIA is clearly correcting the entire post February 2 decline. Where that decline and this rally fit within the bigger picture is still a mystery. There are a lot of possibilities but none are clear so for now we still need to sit back and see how things unfold. The NDX moved below Tuesday’s low locking in the rally from last week as a completed wave on the daily chart and as a corrective pattern on the hourly chart. The rally is best counted as a flat with wave’s “a” and “c’ being nearly perfectly equal at Tuesdays high. Whether this rally is it, or only the “a” wave of a larger pattern is not clear. From purely an Elliott perspective it’s a tossup, however, the hourly chart from Tuesday so far anyway looks corrective and that seems to support the idea that the decline is a “b” wave. Support: S&P; 1353, 1246-1247, 1234-1236, DJIA; 10,620-10,627, 10,565-10,573, 10,465.10,472, NDX; 1955-1959, 1907-1913. Resistance: S&P; 1270-1272, 1280-1283, DJIA; 10,750-10,765, 10,900-10,925, NDX; 2040-2047, 2100-2120.

The market closed higher but clearly mixed with the DJIA up sharply while the NASDAQ averages were barely positive. The S&P was in the middle closing higher but lagging the blue chip DJIA by a wide margin. In essence it was just more of the same. The DJIA did manage to close near the high of the day and the S&P was not far off but the DJIA was the only big cap average to move above Tuesday’s peak. The NASDAQ averages closed about in the middle of what was a very narrow daily range. The S&P was the only average to record an inside day (higher low lower high). Inside days are generally followed by big short-term moves. We saw exactly that on Monday but on Monday it was all of the averages and yesterday it was only the S&P. Breadth was fairly decent and remains a big plus and we also saw a nice expansion in the new highs reversing Tuesday’s potential negative divergence. However, volume was again quite low and continues to reflect a lack of conviction on the part of investors.

The CBOE put to call ratio was about in line with Tuesday’s level and was bearish. The OEX ratio moved lower and was below 1.00 and bearish. The breadth and volume oscillators moved sharply higher and are now close to overbought levels. The 3-day oscillator moved above the +600 level, which historically has been a sign of higher prices on a near-term basis. The McClellan oscillator is neutral but did move back above the zero line. The 10-day and open 10-day Arms moved lower and are borderline neutral. The 5-day Arms is neutral and the 21-day Arms is bullish. The daily range oscillators are neutral but still weak. The daily trend oscillators are neutral.

The market sort of shrugged off Tuesday’s poor close and rallied but the final tally was clearly mixed with the DJIA closing strongly while the NASDAQ averages closed weak. The NASDAQ averages, however, did not gap lower and avoided completing that island reversal discussed yesterday although a poor opening today could still put that pattern in play so I will be watching closely. The DJIA is so far the only average to move above Tuesday’s high and that does set up some potential negative divergences. This gives us one more thing to watch for over the next day or two. A couple of key momentum indicators have moved from very oversold on February 23 to near overbought yesterday. A few more days of strong internal action could turn them medium-term positive but for now I will have to view this as more of a short-term negative rather than a positive. Most of the remaining indicators are neutral but the 3-day oscillator did move above the +600 level and this has in most cases has been a strong indication for higher prices over the very near-term anyway. Short-term sentiment is weakening and yesterday was the second day in a row with the CBOE put to call ratio at bearish levels. The Rydex ratios are still OK and could support some further gains over the near-term, but we are still faced with the same problem as the asset levels in both Ursa and Arktos are still nowhere close to levels seen at important trading lows. Short-term wave counts are not conclusive but can support further gains without hurting the preferred count. .A  number of shorter term momentum indicators are still in a position to support further gains and the signal from the 3-day oscillator in particular seems to support higher prices on the very near-term. However, I am bothered by the sudden and sharp drop in the CBOE put to call ratio and view that as a sign of complacency. This will, as it has in the past, most likely put a lid on the rally soon. I am going to remain neutral on the short-term. Medium-term I am still of the view that we are closing in on a good low that will ultimately lead to a solid sustainable and very tradable rally. While it is indeed possible that the price low is already behind us and all we will get is a modest test of the lows there are a number of technical factors leading me to believe that while we are close the odds of lower lows below the February low is still the most likely course but as stated yesterday, “we are close enough to it to remain neutral and not bearish” Long-term is another story and here I remain steadfastly bearish. The bonds had a good day yesterday closing near their high but do not look like they are ready to move out of the trading range and I remain neutral for the short-term. While the trading range may be a precursor to a modest new high it will most likely put the finishing touches on the post January 2000 rally and I remain bearish for the medium-term. The XAU is still in wave 4 from February 15. Once complete a move above the February 27 peak is expected and I remain bullish in all time frames

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.