 |
August 27 2004 In Dog days Cat shows 9th life (8th? K+n...?)
Just wait till the real traders get back from the Hamptons and put this market in its place. Well, the real traders are in the Hamptons, but the real sources of the rally here are contrarian behavior AND their absence. But, as Joe Kapp said, "The bear will not die." Referring of course to the Cal Bears burning Stanford in The Play. Neither will the bull evidently. Close is above the previous rally high. Raises caution flag. Readers familiar with "basing points" (See 8th Ed. TAST) will know that stops are still far out of reach. We will soon make a monograph on basing points available.
More bear baiting here. We will be looking to add to our short positions soon.
For reasons see next two charts.
|
 |
Note the strange phenomenon of strong rally and falling volume. Every wave has a counter wave. Of this one we can note, both in the SPY and the DIA, that these instruments closed higher than their underlyings. |
 |
As we have been saying for some time the NASDAQ leads. Here it shows weaker than the other indices. Note that it is not as near the July high as the others, and shows the same declining volume pattern.
We never discount the possibility that the markets might return to a broad trading range. What never? Well, hardly ever. As G&S said. In fact there are those who mistake this nascent bear market as a broad trading range.
|
|
|
 |
August 23 2004 Cat Bounces
But then, what do you expect when there are so many live ones? A live one is one who thinks the price is cheap now compared to recent prices so it must be a good buy. Using this theory a portfolio manager for the University of Miami managed to corner Enron. Last week we opined that the cat would bounce, and sure enough. In that situation one is caught between the breakaway and the bounce. Increasing positions may be rewarded with a plunge, or punished with a bounce. The solution is to only put out a bit of your line and wait. (Notice fishing metaphor, and remember Basho's fishing rule: 15% of the fishermen catch 85% of the fish.) Here the Qs are bouncing up to say, smack me again.
|
 |
The Dow is stronger, but in context the weakness of the markets is revealed in the NASDAQ. The blue chips are always the last to fall. The cats and dogs are last to rise and first to fall. The high at the end of July is not the important high. That is in June. Failure to take out the latter is yet another sign of market weakness. |
 |
As we warned last week sharp rallies will bait bears. While such rallies can be trying (until one learns their real friendly significance). Estimating the wave length is an art, not a science. An inexact art. Did we profess to abject humility? But after 40 years in the market we have no ego left. If we did we'd be running for president. |
|
|
 |
August 13 2004 Friday the dead black cat bounce day
The fact, oft observed by Wyckoff, that a panic sell off is followed by an automatic bounce appears again. The mild nature of the bounce and a new lower low four days later leave us wondering if the search for a bottom will further accelerate. But the Spy, seen here, covered the breakaway gap in two days which we would ordinarily think might be a cancelation of it.
In this case we think it is in keeping with the general character of this market. Investors do not want to admit that a bear market is on and will consider sell offs and new lows as over sold buying opportunities. For the technician this means beware of vicious bear baiting rallies.
|
 |
How can it be, with a new day dawning in America and the sun rising on the American promise and yakka yakka yakka. Folks, the market momentum is down because the underlying economic conditions are deteriorating by the day. Why do you think the market flushed itself down the toilet when it got the latest job numbers (32,000, and most of those lies)? Simple common sense: if you kill or export all the jobs nobody has any money to buy stuff at Walmart. Look at this bond chart. What an irony. The rats are leaving the sinking stocks to jump on the bonds which are going to sting them worse than the stocks. Look into this crystal ball and see the Treasury bringing back 30 year bonds at higher interest rates. Then tell us where the rats are going to scurry to. Real estate? Prechter thinks it will suffer a 90% correction. So do we. We've been in this business too long not to recognize a tulipomania when we see it. |
 |
Did we forget to mention the $200 billion (approx.) being flushed down the toilet while nation building in Iraq? Does that have a sucking sound to it? Here is the COMPQ being sucked down, and we suspect, acting as a guide dog (or guide cat and dog) for the blue chips. Whoo-eee. When we get warmed up we can really rip off some deathless prose and stinging witticisms. Or, as Herb Caen would say, is anybody still there? |
|
|
 |
August 6 2004 The other boot falls
We are constantly exhorting our graduate students to be there when this happens, not to jump on it afterwards. Of course, if there had been any doubt about it beforehand this would be the signal, but there wasn't any doubt. The only question in doubt before Friday was whether the Dow would confirm the downtrends of the other major indices. The event is emphasized by the DIA which gapped across the previous low to put an exclamation point on the new low.
|
 |
How low can it go? While there are some flimsy support points on the way down we have marked here at about 1000 on the S&P as the most likely immediate target. A comparable point can be found in the Dow. A sharp rally could be expected about 1050. This is not an opinion. It is an analysis. The soundest analysis in the world can be wrong. It is also true that , right now, to be long is to be wrong. |
 |
As they say, it's an ill wind which blows all ill. Bonds and interest rates rejoice in economic catastrophes. And SHY along with similar instruments gave a clear buy signal. Whoops. We have been waiting to short it and the other bond instruments. Right now it's a buy for the adventuresome. That's the analysis. Our gut is deeply suspicious. Bull trap, it says. |
|
|
 |
July 30 2004 Two out of three. Is the third to fall?
A close up of the rally in the Dow which has so far prevented the Dow from making a new low. Readers familiar with Composite Market Theory from the 8th Edition will remember that we have replaced Dow Theory with CMT which says that confirmation of market status requires harmony among the three major indices. The Dow has held up better than the other indices because of the strength of the Defense issues in it. Otherwise the Dow 30 comprises a miserable looking group of charts. If the Democrats win in November the defense issues will go south in a hurry carrying the others with them.
|
|
|
