DAILY TECHNICAL MARKET COMMENT

By: Larry Katz

April 24, 2001

*These are preliminary numbers and will be adjusted tomorrow

The DJIA lost 47 points and the S&P gave back 18 points on volume of 1.01 billion shares. The A/D line lost 600 units. The new highs did expand a bit and the new lows did likewise. The Russell 2000 lost 5.64 points. I am neutral both short and medium-term. The Value-line lost 16.27 points. I am neutral on both the short and medium-term. The NASDAQ Composite lost 104 points and the NASDAQ 100 lost 121 points. The short-term remains bearish.  The medium-term is neutral but could turn positive based on the current decline. The DJTA closed with sharp losses. The short-term is neutral but beginning to weaken. The medium-term is neutral but also beginning to weaken. The DJUA and UTY closed with solid gains and are back in the vicinity of their recent highs. I m neutral short and medium-term and remain bearish on the long-term.

The S&P moved below Friday’s low confirming the rally from April 12 as a completed wave on the daily chart. The rally from April 12 is difficult but not entirely possible to count as impossible to count as impulsive but in reality looks a lot more corrective. However, assuming it is impulsive the next question is where exactly does that rally fit within the post April 4 advance. I have, the past few days suggested a couple of possibilities in regards to this rally. The first is that it is a third of a third from April 4. Yesterday’s decline has stopped right at a .383 retracment of the rally from April 12. Fourth waves can correct up to about 50% of the preceding third wave, so if this count is correct we need to hold not far from yesterday’s low. The other two possibilities are that the April 12 advance was an extended fifth wave from April 4 or a “c” wave of a flat. The rally from April 12 was close to traveling 1.618 the length of what can be counted as wave .1 of iii and was also close to equality with the April 4 to April 11 advance. Thus Fibonacci price relationships support either the third of a third count or the “c” wave count over the extended fifth wave count. The DJIA is in basically the same position as the S&P as it relates to the post April 4 advance. The DJIA, however, has a lot more room on the downside before it approaches the .383 retracement of the rally from April 12. The NDX moved well below Friday’s low confirming that rally from April 17 as a completed wave on the daily chart. This rally like the S&P is either a third of a third from April 4 or a “c” wave.  It is also possible to count the post April 17 rally as an extended fifth wave from April 4 but like the S&P, internal Fibonacci relationships support the other two counts a whole lot more. If the rally just completed was indeed a third of a third we should know real soon as we should be close to completing a small fourth wave setting up for a modest new high.  The market should tip its hand in the next day or so. Support: S&P 1216-1218, 1204-1206, 1192-1195, DJIA; 10,400-10,415, 10,320-10,330,10,225-10,240, NDX; 1790-1794, 1747-1753. Resistance: S&P; 1231-1234, 1240-1242, 1257-1260, DJIA; 10,560-10,570, 10,620-10,630, 10,730-10,740, NDX; 1857-860, 1890-1896, 1913-1920.

The market closed lower across the board. The DJIA and the S&P to a smaller extent closed off their lows on some last minute buying but the NASDAQ averages did little and closed much closer to the low of the day. The same was true of the small cap averages such as the Value-line and the Russell 2000. Volume was relatively low but as I have pointed out on numerous occasions, low volumes on declines is not necessarily bullish and more often than not bearish. Breadth was again negative. It was not excessively so but negative enough. The new highs did expand at least on a preliminary basis, and on a down day that is a plus. The new lows meanwhile were about flat.

The CBOE put to call ratio did move up from the excessive levels seen late last week but the absolute level was nonetheless negative. The OEX ratio was higher and slightly positive. The breadth oscillator is neutral but close to overbought. The volume oscillator is still very overbought. The 3-day oscillator remains on the sell signal from late last week. The McClellan oscillator is still above zero but barely so. It is neutral and weak. The 10-day and open 10-day arms moved lower The 10 day is borderline overbought while the open 10 remains overbought. The 5-day Arms is overbought and negative while the 21-day Arms is neutral. The new 10-day Arms is on a sell signal and is negative. The daily range oscillators are high neutral. The daily trend oscillators are positive.

The DJIA, after being the weakest of the averages late last week showed a bit of relative strength while the tech heavy S&P and NASDAQ averages took the bulk of the selling yesterday. After the strong relative performance from the NASDAQ the past two weeks it is not surprising but it is still disappointing to see the market continue to perform as it has throughout much of the past 16 months. The CBOE put to call ratio yesterday was disappointing from a bullish perspective as it remained quite low in light of the decline in the averages. There may have been some spillover from last week’s options expiration but on the surface this was a negative and needs to do better. The 10-day moving average is still OK but has eased a lot and is at its lowest level since mid February.  In spite of yesterday’s decline most of the key momentum indicators are still at or near overbought. Other than the volume oscillator they never reached a strong overbought reading such as we saw coming off of the October 1998 low which would indicate a bullish beginning to a medium-term advance but only made it to mediocre levels. Some such as the McClellan oscillator are back to neutral but others need a lot more work including the open 10-day Arms, which remains overbought. We are also on a sell signal from the new 10-day Arms, which is just beginning. From an Elliott perspective we are at one of those short-term cross roads that will clear up in the next day or two. Much further weakness on the NDX and S&P would confirm that the post April 4 rally was complete and allow for much deeper correction. Whether the rally from April 4 on the NDX and March 22 on the S&P is it or only the first wave of a larger pattern may take a bit longer to clear up but the nature of any further weakness will be the key. In the meantime, the indicators that turned me negative last week for the short-term remain so and the short-term sell signal remains in place. For the time being I am going to remain neutral on the medium-term but depending on what we see over the next few days that signal is poised to change. Long-term I remain bearish. The bonds rallied sharply yesterday. The indicators remain negative but the rally could carry on a bit more so I am going to move back to neutral on the short-term where I should have remained in the first place. Medium-term I remain bearish. The XAU is still OK but needs to rally now or the bullish picture could abort. I am going to remain bullish in all time frames but that could change as early as today.

We covered ½ of our ½ short position in the QQQ’s per the morning hotline for a 3.14 point gain. We are now holding a ¼ short position from 49.25. They closed yesterday at 45.15. Keep your stop  on this position at 48.22 and make sure to call the early morning hotline for further instructions. 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.