DAILY TECHNICAL MARKET COMMENT

By: Larry Katz

April 25, 2001

*These are preliminary numbers and will be adjusted tomorrow

The DJIA lost 78 points and the S&P gave back 15 points on volume of 1.20 billion shares. The A/D line was flat. The new highs expanded and the new lows eased. The Russell 2000 gained 1.28 points. The short-term is neutral. The medium-term is neutral but slipping. The Value-line lost 2.59 points. The short-term is neutral. The medium-term is neutral but slipping. The NASDAQ lost 42 points and the NASDAQ 100 lost 50 points. The short-term remains negative. The medium-term is neutral but poised to move over the next few days. The DJTA closed lower. 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 very modest gains. The short and medium-term are neutral. The long-term is bearish.

The S&P hourly chart can be counted as a five-wave pattern into yesterday’s low. However, the fifth wave is a bit long in relationship with wave 1 and almost so with wave 3. This does not invalidate the five but does question the pattern. So far the daily chart from Friday remains down and that allows for the possibility that the decline can extend and also invalidate the five-wave decline. A rally from here would give the five a much better chance of being correct and allow that the pattern from April 20 is not over.  The S&P did break the .383 retracment of the rally from April 12 but has so far held above the 50% level keeping open the possibility that the post April 12 rally was a third of a third from April 4 and the current decline wave 4 of 3. Given the potential five down it makes it hard to place this count in the forefront, however, until that support level breaks it can not be ruled out.  Further weakness tomorrow could confirm the post April 4 advance as a completed wave and as a corrective one. The DJIA rallied above Monday’s high locking in the decline from Friday to Monday as a completed wave on the daily chart and as a three wave pattern on the hourly chart. The subsequent move below Monday’s low yesterday is best counted as a ”c” wave from Friday. Equality with wave “a” yields a target just above 10,400, which coincidently is also the .383 retracement of the post April 12 rally.  Given the corrective nature of the decline the possibility remains that this decline may be wave 4 of 3 from April 4. The NDX like the S&P may be counted as having completed a five-wave decline from Friday at yesterday’s low. However, like the S&P the fifth wave is out of sync with wave 1 and wave 3. Nonetheless, it can be counted as a five but until it is confirmed as such it is not a high confidence pattern. The NDX broke well below the 50% retracement of the rally from April 17 and that has eliminated the possibility that the post April 17 rally was a third of a third from April 4. The decline has so far held the .618 retracement of the rally from April 17 and that keeps open the possibility that the decline is related to the post April 17 advance. Even so, It is much more likely that the decline is correcting the entire post April 4 advance if not more. Support: S&P; 1204-1206, 1192-1195, 1150-1155, DJIA; 10,400-10,415, 10,225-10,240, NDX; 1740-1746, 1640-1652. Resistance: S&P; 1222-1224, 1236-1238, DJIA; 10,560-10,570, 10,610-10,625, 10,730-10,740, NDX; 1818-1822, 1841.1846, 1892-1902.

The market traced out a negative reversal pattern and closed near the lows of the day. The DJIA traced out a negative outside day (higher high, lower low) while the S&P did not have enough to come close to Monday’s peak. The mid session failure and reversal pattern was also accompanied by a modest expansion in volume. It was close to climactic levels but did confirm the negative price action. Breadth on the other hand was near flat and in spite of the weak performance we did see a nice expansion in the new highs and a slight easing in the new lows. The NASDAQ for the second day in a row was the weakest of the averages and has given back nearly all of its gains from the day the FED cut rates last Wednesday.

The CBOE put to call ratio moved up a bit but is no better than neutral. The OEX ratio was very bullish. The breadth oscillator moved lower and is mid neutral. The volume oscillator moved lower and is still very overbought. The 3-day oscillator is neutral. The McClellan oscillator is neutral and still above zero but did have a very minor change yesterday indicating the high probability of a fairly big move in the next day or two. The 10-day and open 10-day Arms moved up a bit. The 10-day is neutral but still close to overbought while the open 10 remains overbought. The 5-day Arms is beginning to relieve the overbought condition but remains negative. The 21-day Arms is neutral. The new 10-day Arms remains on a sell signal. The daily range oscillators are neutral. The daily trend oscillators are positive.

The DJIA for the second day in a row held up far better than the S&P and the tech heavy NASDAQ after taking a back set for the better part of two weeks. Under normal circumstances I would view this as nothing out of the ordinary but these are not normal circumstances and have not been for over a year. Frankly the action of the past two days has been more than I would have expected if it was indeed simply a short-term correction of the excessive behavior of the past two weeks and there was a bona-fide shift in relative strength talking place on a medium-term basis. It still may be but we are going to have to see the negative relative behavior of the tech stocks begin to abate soon. Some of the overbought condition on a couple of indicators has improved, but for the most part they remain close to where they were last Friday when they turned bearish for the short-term. The 10-day Arms is near overbought and the open 10 remains overbought while the new 10 is nowhere close to reversing its triple sell signal.  There has been some improvement in the CBOE put to call ratio but not enough to be much of a factor other than real short-term. In fact, the 10-day moving average has moved lower and is borderline negative. The McClellan oscillator had a very minor net change yesterday of less than 2 points. This is usually a precursor to a large move in the very near-term. The last such signal we had was last Thursday of last week and it was quite timely. While it is not the best looking of patterns both the S&P and NDX do show possible five-wave declines on their hourly charts from Friday and that could set up for a decent rally. However, while there has indeed been some improvement in the indicators, it has been very minor in scope. The sell signal from last week has not been reversed, and it is not even close. Any rally from current levels should be viewed as a correction of the recent decline and I remain bearish on the short-term.  The medium-term remains neutral. It is poised to change in the near future but at this point I am not sure which way. Long-term I remain bearish. The bonds look to have more to go on this rally. The short-term is neutral. The medium-term remains negative. The XAU had a good day closing on its high and close to last weeks peak. It remains bullish across the board but needs to keep on rallying to remain positive.

We are holding a ¼ short position in the QQQ’s from 49.25 having covered a ¼ position on Monday for a 3.14 point gain. They closed yesterday at 44.30. Lower the stop to 47.60 and make sure to call the early morning hotline for any changes. 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.