john magee technical analysis::delphic options research ltd    

We have opined that the 10000 level will act as a formidable barrier to price advance. Our present opinion is that 10000 will act like 1000 from 1965-82, that is prices may make advances across it, but we expect those to be false excursions. A solid advance beyond 12000 would change our opinion. Meantime the rally off the terrorist low shows considerable strength. If we had traded the short term trend long (as we indicated aggressive traders might want to do) we would be peeling off our position here, expecting 9900 and 10200 to be the high water mark.

We would not be surprised to see the downward waves of the S&P and the NASDAQ develop in the Dow. This is a highly speculative statement, but it does appear that the rally off the Terrorist low is, as we judged, stalling and perhaps ending. Projecting is one thing, observing events is another, and the minor uptrend has already broken its trendline. We shall now see if the patterns etched out by the two other indices is repeated in the Dow. At any rate the medium and long term momentum is so clearly down that long positions now in anything but truly exceptional issues would be highly questionable. Shorts. Puts. Perhaps short calls for the flashy. Expect strength prior to the Federal Reserve meeting as rates will fall. Generally this is followed by a brief sell off.

The series of ever lower horizontal lines, as well as the broken angled (trend) lines tells its own story. The volume tells a story too. These stories for the moment do not have a happy ending. There is no predicting what the market will do right now, so investors are well advised to continue hedged and traders are advised to maintain a very short term outlook with tighter than normal stops. The market is nervous as a cat (after the dead cat bounce, and Halloween coming up) and if times were not unique (as in 9/11 caused a paradigm shift) the market would be looking to form a bottom pattern here. Given that the land of the brave has turned into the land where Congress heads for the hills at the first whiff of anthrax the best policy is to keep your head down. Considering these circumstances short looks like a better way to be than long. We have written a long term perspective letter which offers some perspective on this moment in the market. See Paid Services.

Holy skamoly. As if all that weren't enough the witching day is coming up. Friday is Halloween for the market. If we were short term traders we'd be shorting right now. Long term traders should be doing what we told them to do for more than a year. Just based on judgment and our secret measuring techniques we think the dead cat bounce has about run its course for the moment. REMEMBER: Think is not observe, and is an opinion, not an analysis.

Short, Sweet and Succinct: The shrinkage of volume on the bounce from the bottom is ominous. Need we point out the implications of this? If it is not clear to the reader he should click on the information on the Golden Gate Seminars. Fair warning.

Long term investing: (from our comments of Jan 01) We see no reason to change these comments this week. Isn't that boring?

Dow: The Dow can expect to find support at 10000 and is buyable, but in small commitments or portions of a portfolio or additions thereto. We expect to see it in a very large see saw from 9-12000 for some time and would hedge at the high end and increase commitments and lift hedges on oversold conditions at the low end. Jan 15: Don't hang up. We change our minds everyday according to the conditions of the moment.

S&P: We have pretty much the same opinion about the S&P with the range being 1200-1500 and would follow the same strategy.

NASDAQ: This thing is on wheels--either that or a Roman candle (not referring to candlestick patterns, but to the fireworks.) Can you buy it? If you're faster than a scalded skunk. At least there is a line of defense about 3700. But it's definitely playing with fire.

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