DAILY TECHNICAL MARKET COMMENT

By: Larry Katz

April 10, 2001

*These are preliminary numbers and will be adjusted tomorrow

The DJIA gained 54 points and the S&P added 9 points on volume of 998 million shares. The A/D line added 800 units. The new highs expanded a bit but so to did the new lows. The Russell 2000 gained 7.01 points. The short-term is neutral. The medium-term is negative. The Value-line gained 13.88 points. The short-term is neutral. The medium-term is negative. The NASDAQ Composite gained 25 points and the NASDAQ 100 gained 33 points. The short-term is neutral. The medium-term is neutral but in a bottoming process. The DJTA gained 29 points. The short-term is neutral but improving. The medium-term is negative but also improving. The DJTA and UTY closed higher recouping most of Friday’s loss. The short-term is neutral but back towards important resistance. The medium-term is negative but not far from neutral and the long-term is negative.

The hourly chart of the S&P from last Thursday’s high has been in a fairly tight range and has the look of a possible near completed triangle. The rally from April 4 to April 5 shows a very clean five-wave pattern on the hourly chart so if a triangle does prove to be correct, it will most likely be a “b” wave from April 4. Within the possible triangle we have completed or nearly completed 4 of the 5 waves required for the pattern. Wave “d” may have a bit more to go but a move above yesterday’s high prior to wave “e” would eliminate this pattern so we still need to see some minor retracement some time today prior to a sharp and quick thrust above the April 5 high. The alternate count is that the decline into Friday was a “b” wave from April 5 and that the rally from that low is a developing “c” wave from April 6 to complete wave “c” from March 27. The DJIA moved above last weeks high yesterday but in a sloppy corrective manor leaving open the possibility that yesterday’s rally was a “b” wave from April 5. This possible “b” wave may also be a “b” wave of a triangle or a “b” wave of a second three from April 4. There are also a number of other possibilities in regards to the DJIA like determining if March 27 or April 2 was the orthodox top of the rally from March 22. We have had this problem with the DJIA earlier this year and ultimately it has cleared up. I expect it will do so this time as well although it is frustrating. However, it still seems the most likely course over the short-term is a move past the April 2 high towards resistance in the 10,200 area. The pattern on the hourly chart of the NDX from the April 5 high is not clear but the initial decline is best counted as a three. Unless the post April 4 rally is going to unfold as a triangle from March 23 and that is possible, it is likely that the April 4 rally is not a fourth wave from March 23 but until the pattern resolves I cannot say that with a high degree of confidence.  If we get conformation that the rally from April 4 is more than a small fourth wave then we have to go with the idea that April 4 completed the pattern from late March and was either wave v from January 24 or wave 5 of iii from that same high. The key remains the weekly chart. A move above last weeks high of 1594 would turn the weekly chart positive and confirm that the decline from January was over. Until that occurs we have to allow for lower lows to complete the pattern. Support: S&P; 1113-1116, 1080-1090, DJIA; 9650-9660-9580-9600, NDX; 1410-1415, 1300-1310. Resistance: S&P; 1146, 1154-1157, 1170-1173, DJIA; 9990-10,010, 10,190-10,210, NDX; 1515-1520, 1548-1556, 1594.

The market closed higher but well off its early highs We did get a bit of pop late in the session but the averages ended about in the middle of the days range. Volume declined sharply into the rally, showing a lack of conviction. Breadth was fairly decent but that was about it. The new highs expanded, somewhat confirming price but we also saw a slight expansion in the new lows, which was not a very positive development. The NASDAQ averages were weak most of the day but did rally late in the session and closed not too far from their early highs.

The CBOE put to call ratio was quite positive yesterday. The OEX ratio was somewhat negative. The breadth and volume oscillators moved lower. They are neutral but the volume oscillator is close to oversold. The 3-day oscillator is neutral. The McClellan oscillator moved slightly above zero. It is neutral but inconclusive. The 10-day and open 10-day Arms moved a bit higher. They are oversold and bullish. The 5-day Arms is beginning to ease but is still positive and the 21-day Arms is oversold and bullish. The new 10-day Arms is on a sell signal. The daily range oscillators are neutral. The daily trend oscillators are slightly positive.

The sharply higher opening took the DJIA above its peak of last week while neither the S&P nor the NASDAQ came close. This was not unlike what we saw on April 2 and it did set the stage for an intra day reversal. While the averages did close well off their early highs they nonetheless did show some resiliency yesterday as they did bounce back from their lows to close on the plus side. The fact that volume was light does detract quite a bit from the somewhat positive price action suggesting that there remains a big lack of conviction on the part of investors and traders. The market can rally on light volume for a while but not for long. The sharp rise in the CBOE put to call ratio yesterday has to be viewed as a surprise and a positive one at that. The Rydex ratios slipped late last week and the asset levels in both Arktos and Ursa are still nowhere close to levels that could be construed as bullish. However, they are still OK and could support further price gains over the near-term. We also have favorable readings in the Arms indexes with the exception of the new 10 which is on a sell signal. The favorable position of the 5 day Arms will begin to dissipate over the next few days and given the takeaway figures the next few days could actually turn negative, but for now it is positive. The daily trend oscillators are also positive albeit only slightly so but this along with the Arms and the short-term sentiment is enough to expect that the rally has some more life left in it. As such, I still expect to see the S&P challenge its late March peak and the DJIA should surpass its early April peak. Medium-term I see enough improvement to suggest that the majority of the decline could very well be behind us, but there remains a number of missing pieces (see the letter from Sunday night) that argues strongly that while we may in fact be getting closer we still have more work cut out for us before a good medium-term low can be seen. While it is tempting to play the short-term rally the medium-term picture is such that all we can do is remain neutral on both a short and medium-term basis. Long-term I remain bearish. The bonds still have a chance to rally but the short and medium-term picture remains negative and any rally from here should still be viewed as counter trend only. The XAU is close to turning positive but is still not there. I remain 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.      

Please note. I will be traveling beginning early Wednesday morning. The letter for Tuesday will go out as usual. I will try to get a brief letter or comment out on Wednesday. The nightly hotline will be on Wednesday night. There will be no intra day hotline on Wednesday or Thursday. Friday is a holiday so there will be no letter in any case for that morning (Thursday night). I will get a brief comment up on the web site by late Sunday evening for Monday. Thank you.