john magee technical analysis::delphic options research ltd    

Finishing May and beginning June the handwriting is on the wall. Ignore continuing downtrends at your own risk and the risk to your portfolio. Lack of stops here will lead to tears later.

We have breakdowns in all the major indices. There should be some support around 9900 to 9600 in the Dow. Failure of this support will direct attention to the lows at 9000. At this point we don't know whether the sideways trend (the Mule Market) will reconstitute itself, or whether the terrorist low will be tested. We do know it's not a time to be long, but we have known that for months, if not years.

Maybe a wedge with an early breakout (bull trap). Dow was turned back more or less where it should have been. Dow appears to be held up by fund managers. Wonder how much money they have. Blue chips last to fall. The S&P probably tells the clearest story--back to the trading range. The NASDAQ is trying to decide whether to test the 1500 support level. Our investment policy remains unchanged. Trade, not aid.

The minor broadening top continues to form in the Dow. Traders know that losses and profits come with equal (or worse) regularity. So attempts to short the Dow on key reversal days may not be successful on the first attempt. The four year chart shows vividly how the Dow is squarely into major resistance. This combined with low volume and clear reactionary character of the S&P and the NASDAQ incline us to avoid long commitments as investors--and certainly to be hedging here. And to expect that the next important move will be down against the reactionary uptrend began after the terrorist bottom.

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.

©1999-2000 w.h.c. bassetti dor