DAILY TECHNICAL MARKET COMMENT

By: Larry Katz

April 11, 2001

*These are preliminary numbers and will be adjusted tomorrow

The DJIA gained 258 points and the S&P added 31 points on volume of 1.35 billion shares. The A/D line added over 1000 units. The new highs expanded a bit and the new lows eased. The Russell 2000 gained 10 points. The short-term is neutral and near resistance. The medium-term remains negative. The Value-line gained 31.90 points. The short-term is neutral and near resistance. The medium-term is negative but improving. The NASDAQ Composite gained 106 points and the NASDAQ 100 added 116 points. Both closed near the highs of the day. The short-term is neutral and near resistance. The medium-term is neutral but close to turning positive. The DJTA closed with very strong gains. The short-term is neutral but improving. The medium-term is negative but also improving. The DJUA and UTY closed strongly higher The short-term is neutral but near resistance. I am moving to neutral on the medium-term and remain bearish on the long-term.

The S&P rallied as if it was coming out of a triangle, but the “e” wave of the possible triangle never did evolve eliminating that as a possible count. The hourly chart from Friday shows a three-wave pattern so far but I am expecting a five to evolve given the fact that the April 4-April 5 advance is a five so a move back above yesterday’s high should occur prior to a correction. The rally from April 6 is either a third or “c” wave from April 4. The S&P has not moved above the March 27 peak and that leaves open the possibility that the rally from April 4 is a “c” wave of a triangle from March 22. This will remain a possibility as long as the S&P remains below the March 27 high of 1183. 24. The DJIA moved decisively through the April 2 peak and came close to resistance. The rally from Fridays low is so far a three. The rally from April 4 to April 5 is a five so I would expect to see a five from April 6 implying that a move above yesterday’s high is expected. The rally from April 4 is either a “c” wave from March 22 or a second three from that same low. If the former then we still need to see a fourth and fifth wave once the post April 6 rally is complete. If the latter a modest new high will do the trick. The NDX moved above last weeks high turning the weekly chart from January 24 up and confirming that decline as a completed wave. This should allow for some further gains even if only on a near-term basis. The rally from April 6 can be counted as a nearly completed five-wave advance on the hourly chart and both the daily and hourly chart from April 4 shows a so far three-wave pattern. How we progress from here will be very important and I will be watching closely to see if a five from April 4 evolves. The near completed pattern from Friday allows for a possible correction to begin at any time, and how that unfolds if we get it will be very important. Support: S&P; 1155-1156, 1144-1146, DJIA; 10,010, 10,016, 9920-9930, NDX; 1550-1154, 1505-1511. Resistance: S&P 1174-1177, 1183, 1200-1210, DJIA; 10,190-10,210, 10,270-10,300, NDX; 1610-1620, 1650-1660, 1700-1712.

The market had another very solid day, and while the averages did close a bit off of their highs they also managed to hold into most of their early gains. Yesterday also saw broad based participation with indexes like the Value-line in the small cap area keeping pace as well as a strong performance from the technology sector.  Volume was not great but it did expand. Breadth was fairly decent at just over a 2 to 1 positive plurality. The new highs expanded but look to have come in slightly below their peak for the post March 22 rally. The new lows eased but were still relatively high give the strength in the averages.

The CBOE put to call ratio moved lower and was bearish but not at extreme levels. The OEX ratio moved higher and was slightly positive. The breadth and volume oscillators moved higher but only slightly so and are showing a potentially minor divergence. The 3-day oscillator moved higher. It is overbought but did close above +600. The McClellan oscillator looks to have broken out at least short-term and still has a bit of room before reaching overbought levels. The 10-day and open 10-day Arms were flat. They are still oversold and slightly positive The 5-day Arms moved down sharply and is slightly overbought. 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 positive.

The market was firing on all cylinders yesterday. All of the market averages participated in the rally, breadth was good and we even got a little expansion in trading volume. We have conformation from most of the indicators on a short-term basis. The 3-day oscillator moved above the +600 level and in most cases that suggests that there is more to go. The 5-day Arms has slipped and is negative and yesterday saw sharp drop in the CBOE put to call ratio. The latter was bearish but not excessive and is still OK. The Rydex ratios are OK but are also slipping and the asset levels in both Ursa and Arktos, and especially Ursa weakening. They can support a bit more upside but they are also weakening. The wave structure even in the most negative of cases is supportive of some further modest gains and over the very near-term the rally looks to have a bit more to go. I had expected the S&P to move back towards the lat March high and the DJIA to move above those levels and we got it. In hindsight, a move to bullish on the short-term would have been a better call but frankly I am happy staying neutral and although I do see more upside from here it is my view that the best of the rally is behind us and I will remain neutral on the short-term. Medium-term my view has not changed although it is being sorely tested. The backdrop has improved enough to suspect that the bulk of the post January (February on the DJIA) is behind us but I have still not seen enough to convince me that a low is in place and once this rally runs its course a deep test or marginal new low is expected and I remain neutral. Long-term I remain bearish. The bonds broke down through support yesterday in what is clearly third or “c” wave action. Short and medium-term I remain bearish. The XAU remains neutral in all time frames.

QQQ traders bought a 1/3 position per the mid day hotline at 40. Buy another 1/3 position at 38.80 only if the NDX does not move above 1620 prior to execution. Keep your stop at 35. 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.  I will be traveling tomorrow there will be no intra day hotline. There will be a brief letter and hotline tomorrow night.