DAILY TECHNICAL MARKET COMMENT

By: Larry Katz

March 9, 2001

*These are preliminary numbers and will be adjusted tomorrow

The DJIA gained 129 points and the S&P added just under 3 points. Volume eased slightly from Wednesday coming in at 1.10 billion shares. The A/D line added 300 units. The new highs and the new lows expanded. The Russell 2000 lost 3.35 points and closed near its low of the day. The short-term is neutral. The medium-term is neutral but weakening. The Value-line lost 3.10 points and also closed near the low of the day. The short-term is neutral. The medium-term is neutral but weakening. The NASDAQ Composite lost 55 points and the NASDAQ 100 lost 58 points. Both closed near the low of the day. The short-term is neutral but weak. The medium-term is neutral but also improving. The DJTA gained 26 points. The short-term is neutral. The medium-term is neutral but close to going negative. The DJUA and UTY closed higher. The short-term is neutral but close to turning negative. The medium and long-term are negative.

The S&P had held above Wednesday’s low keeping the daily chart from last Friday positive. From Tuesday’s high the S&P has been in a fairly tight range. The rallies and declines have been three-wave patterns on the hourly chart and given the position of the daily chart it is very likely that the S&P is finishing off a small fourth wave triangle from last Friday. If correct we should see a short rally above Tuesday’s high to complete wave “c” from last Thursday. Waves “a” and “c” will be equal at 1270, which would keep the S&P below last weeks peak of 1272.76. As long as we remain below that level this week it will be possible to count the rally from last week as wave “c” of a triangle from February 23. The DJIA has kept on going moving decisively through last weeks peak and above initial resistance. The hourly chart from last week is still not impulsive, but as long as the daily chart remains up it has a chance to unfold as such. It does not seem likely that this rally is a “c” wave or even a second  three from the February 23 low so just how to count it is not clear yet but it does look to have a bit more to go. The NDX moved lower and came close to important support near the .618 retracement of the rally from last Thursday into Tuesday’ high. That rally as discussed yesterday is clearly a three but whether it is all of the pattern or only the “a” wave with the current decline wave “b”. The fact that so far the decline does not look impulsive seems to support the idea that it is a “b” wave but as long as the daily chart remains down it is not impossible to see the decline yet unfold as impulsive. A break of support near 1906 would be a big negative. Support: S&P; 1257, 1246-1247, 1234-1236, DJIA; 10,750-10,760, 10,680-10,690, NDX;1907-1913, 1840-1860. Resistance: S&P; 1270-1272, 1280-1282, DJIA, 10,890-10,910, 11,000-11,050, NDX; 1967-1970, 1992-1998.

The DJIA closed sharply higher and on its high. The S&P closed higher but lagged badly as it was up only about 20% as much as the DJIA. The NASDAQ averages took a different path closing lower and near the lows of the day. And so the saga continues. On the plus side for the listed averages anyway is the fact that they did rally late in the session. However, for the third day in a row a rally in the DJIA and the NYSE Composite was accompanied by weak and contracting volume. Breadth was positive yesterday but did lag the DJIA and even the NYSE Composite. The new highs expanded confirming price and remains one of the more positive aspects of the rally. The new lows also expanded but are nowhere near levels that could be viewed as a problem.

The CBOE put to call ratio moved up late in the day and was neutral. The OEX ratio moved lower and was extremely bearish. The Rydex ratios are still OK. The breadth oscillator is close to overbought and the volume oscillator is overbought. The 3-day oscillator turned down after moving slightly above the +600 level Wednesday. It is neutral. The McClellan oscillator moved a bit higher. It is neutral and slightly above zero. The 10-day and open 10-day Arms were flat. They are borderline neutral. The 5-day Arms has turned negative and the 21-day Arms is oversold and slightly positive. The daily range oscillators are neutral. The daily trend oscillators are neutral but close to going positive.

The past three days has seen the disparity between the DJIA and the rest of the market move to almost extreme levels. The S&P has been stuck in a range while the NASDAQ has moved down sharply. The Value-line index, which over the past few months has followed the DJIA actually closed lower yesterday even as the DJIA was soaring, also closed lower. Its failure to follow the DJIA yesterday is a warning sign. Yesterday was the fourth straight day of price gains on weak or declining volume, which continues to suggest that there is very little conviction behind the latest move. The breadth and volume oscillators are not at or near overbought levels after being extremely oversold less than 2 weeks ago. They could as we discussed yesterday reach thrust levels over the next couple of days if the internals continue to perform well but the overbought condition currently is a short-term negative. The CBOE put to call ratio actually moved higher into the rally and that has to be viewed positively. However, the OEX ratio, although a lot less reliable, moved down sharply and was extremely negative. The Rydex ratios remain Ok but with the risk of sounding like a broken record, the level of assets in Ursa and Arktos are nowhere close to levels consistent with important trading lows. We did see some improvement in the Investors Intelligence survey with the percentage of bears rising to 34%. However, the bulls are still well over 50%. The bull/bear ratio is still very negative and this key indicator is still not even neutral let alone close to positive. Yesterday the 3-day oscillator moved above the +600 level and in most cases that has been a good signal for further gains. Yesterday’s modest gains in the S&P and NYSE composite have satisfied that signal. Don’t get me wrong, there are some definite positives. The rise in the put to call ratio yesterday into the rally and the expansion of the new highs to name a couple. However, it looks to me that the bulk of this rally is most likely behind us and that a decline in both the DJIA and the S&P are close at hand. My short-term view on the S&P is that it will remain within a trading range for a while longer or in Elliott terms a triangle so while I see a possible decline coming I do not see enough to move from neutral on the short-term. Medium-term nothing has changed. We are getting close to a good low and a sustainable rally but we still have more work and I remain neutral. Long-term I remain bearish. The Bonds moved back towards the upper end of the trading range but nothing has been resolved as yet. I am neutral short-term and remain bearish medium-term as I view this as part of a topping pattern. The XAU broke out of its short-term trading range yesterday and rallied sharply closing near its high of the day and well above the February 27 peak. The rally is either wave 5 from February 15 or a third of a third. We should know a lot more today but given the position of the indicators both short medium and long-term the overall picture remains very positive 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.