DAILY TECHNICAL MARKET COMMENT

By: Larry Katz

March 30, 2001

*These are preliminary numbers and will be adjusted tomorrow

The DJIA gained 14 points while the S&P lost 5 points. Volume was 1.23 billion shares. The A/D line lost 100 units. The new highs and the new lows expanded. The Russell 2000 was near flat. The short-term is neutral but close to turning down. The medium-term is neutral but also close to turning negative. The Value-line lost 5.20 points. The short-term is neutral but close to going negative. The medium-term is neutral but also close to going negative.  The NASDAQ Composite lost 33 points and the NASDAQ 100 lost 38 points. The short-term is neutral and could be close to a low. The medium-term is neutral but also close to a low. The DJTA lost 11 points. The short-term is bullish but needs to rally to maintain a positive position. The medium-term is neutral but is very close to turning back to negative. The DJUA and UTY closed higher. The short-term is neutral. The medium and long-term remain negative.

The hourly chart of the S&P from Tuesday looks so far to be corrective while the rally from last weeks low is  a confirmed three-wave patter. Since the daily chart from Tuesday is still negative so a five-wave impulsive pattern from Tuesday’s high may still unfold. However, a move above yesterday’s high of 1161.69 would confirm the decline as complete on the daily chart. The rally from last week’s low can still be counted as a fourth wave from the January 31 peak as long as the S&P remains close to this week’s high of 1282. A move above slightly above that level would be OK but only slightly as that is both the 50% retracement of the decline from February 27, which can be counted as wave 3 and also close to the fourth wave of previous degree. A move much above that level would most likely confirm that the rally was correcting the entire decline from January 31. The rally from last weeks low to Tuesday on the DJIA can be counted as a five on the hourly chart. Yesterday the DJIA moved below the low of Wednesday confirming that rally as a completed wave on the daily chart. And locking that possible five in place. The decline from Tuesday is looking corrective but as is the case with the S&P, the daily chart remains down so a five could develop. However, given that we already have an acceptable five on the upside the odds seem to imply that the current decline is a “b” wave from last week and not the start of a new wave to the downside and a move back above Tuesday’s high to complete a “b” wave from March 8 is expected. The NDX moved below last week low confirming that the pattern from January 24 is not over. The decline from Tuesday’s high on the hourly chart can be counted as a five so a ally could get underway at any time. A move below yesterday’s low of 1543 would confirm the pattern was extending. It is not impossible but close to it to count the decline into yesterday’s low as a fifth wave from January 24. The most bullish case I can make is that it was wave .5 of iii leaving one more fourth and fifth wave to complete the pattern. The area near 1750 remains a primary focus for the next week as a move above that level would turn the weekly chart up. Support: S&P 1130-1132, 1118-1122, 1090-1100, DJIA; 9620-9630, 9425-9440, NDX 1540-1550, 1448-1460. Resistance; S&P; 1152-1154, 1166-1168, 1182-1184, DJIA; 9880-9900, 10,190-10,200, NDX; 1623-1625, 1672-1676, 1750-1755.

The DJIA ended a volatile session with a modest gain but well off its mid session highs. The S&P and even the broad based NYSE Composite ended the session lower but well off their days low. Volume eased from Wednesday and given the mixed performance I would rate is as neutral to slightly negative. Breadth was near flat and that too is a neutral. The new highs expanded a bit as did the new lows. The new highs seemed to confirm the DJIA in its slightly positive close while the new lows confirmed the move below Wednesday’s low. It looks like we have a little bit for everyone. The NASAQ averages closed lower but also bounced into the close. However, the Composite did not move below last weeks low setting off a potential positive divergence with the NDX that did move below its low.

The CBOE put to call ratio moved up sharply on the day and was bullish. The OEX ratio eased a little but was still quite positive. The breadth and volume oscillators moved slightly lower. They are neutral, having  relieved the oversold condition from last weeks. The 3-day oscillator is neutral. The McClellan oscillator is neutral but still below zero. The 10-day and open 10-day Arms moved up slightly. They are neutral but still closer to oversold. The 5-day Arms is bearish and the 21-day Arms bullish. The new 10-day Arms is neutral. The daily range oscillators are neutral but weak. The daily trend oscillators are slightly positive.

The market showed a good deal of volatility yesterday with the averages showing a number of directional changes. When this type of behavior occurs after a rally or decline has been in progress and near the upper end of the rally or lower end of the decline it is a strong probability that it is signaling a change in trend is in the making, at least on a short-term basis. However, yesterday most of this activity especially on the S&P came about in the mid point of the rally from last week making it difficult to get a handle on. Perhaps some of this is due to end of quarter behavior as that tends to produce a lot of volatility as portfolio managers make last minute adjustments before reporting to their clients. This process will carry on through today so we might expect to see more volatility and price swings. From a technical perspective there is not much change from yesterday. The short-term picture is mixed. The Elliott picture at least as far as the DJIA is concerned is somewhat favorable. I did like the fact that the CBOE put to call ratio moved up yesterday and we still have decent numbers from the Rydex ratios. However, on this score both the levels of assets in Ursa and Arktos are still way too low to support anything more than a short-term rally if that. It seems that people are still not willing to bet too much on the downside. I see the possibility of the rally continuing but not enough to want to play it and I am going to remain neutral on the short-term but slightly favoring a rally. Medium-term nothing has changed. We may be getting closer to a bottom as the technical situation has continued to make progress. However, for the same reasons as yesterday I do not see a bottom in place and still fully expect to see last weeks low on the S&P and DJIA broken before a low can be confirmed. That should put me in the bearish camp but at this point I do not expect to see a huge break of that low but only a modest one. Given the improvement in a number of areas this modest new low I am expecting could very well set up for a more genuine rally. This is all predicated on how the decline unfolds but for now given that view I think neutral is the best place to be. Long-term I remain bearish. The bonds remain oversold on the very short-term and that could lead to a decent rally at anytime. However, both the short and medium-term remain negative and lower prices are expected. There I no change in the XAU. The decline from February 27 is at best an as yet completed “b” wave from October.  I am neutral in all time frames.

Stock index futures traders are flat. Stand aside for the morning. QQQ traders are flat. Cancel all outstanding instructions and stand aside. Rydex switchers are holding a 20% Precious metals and 10% OTC position. Make sure to call the Noon Pacific hotline for any changes. The morning hotline will be on at 7:15 AM Pacific time.