Katrina Weakness Will Provide Long-Side Opportunity For Daytraders

NYSE volume of 1.18 billion shares, but mostly all to the downside with the

volume ratio just 19 and breadth -1281. The SPX
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-0.6%, and was the low close of the key time week at -1.2% on the week. The

decline from 1245.86, the 08/03/05 bull cycle high (and key time zone), is now

17 days old, but the SPX remains in an “Above the Line” condition with the

20>50>200-day EMA. The 200-day SMA is 1195 and the 200-day EMA 1189 (primary

far at 10,983 on 03/07/05, has closed below both its 200-day EMA of 104.52 and

233-day EMA at 104.22 for the third time since the 04/20/05 low of 99.89. The

DIA went out at 103.90 with the next zone of trading interest at 103 – 102.50,

which includes two lower channel lines and the 102.73 .618 retracement to the

04/20/05 99.89 low (see chart). The XLB is also trading below its 200- and

233-day EMAs of 28.26 – 28.12. The 200-day SMA is up at 28.95, while the DIA

200-day SMA is 105.37. Major XLB price support is 27 – 26.70 as the XLB closed

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PowerRating), -0.1%, were essentially flat, while the financials led the downside

with the BKX -2.5% and XBD -1.8%. The yield curve has flattened, and that’s the

10-year notes minus the 13-week T-bills, and when that gets squeezed, the banks’

profit margins get squeezed. Retail was right behind with the RTH -1.7%. On the

bond side, the
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PowerRating) was +0.8% for the week, with the XAU -2.4%. Of course,

crude oil made new highs during the week. The homebuilders have had significant

insider selling and continue to decline from the July highs. For example,

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PowerRating) is -20% in 27 days to a 64.81 close, down from 79.66. The 200-day EMA

is 63, 200-day SMA 62.64 and 233-day EMA 61.71. The “V” top at 79.66 will have a

close, which was SPX 1211.92, while the Dow closed at 10,397, -3.6% below its

12/31/04 close of 10,783. Not very good price action after all the earnings hype

about 70% of the S&P 500 stocks with better-than-expected earnings, etc. It is

no different than 2000 as prices in the major indices began the bear market in

spite of all of the positive hype and reports by those that want to keep you in

then Thursday and Friday of next preceding the Labor Day weekend. September has

generally been a very unfavorable month, so I would expect the next short-term

opportunity will be from the long side after any further weakness or selloff.

Should the major indices instead make a significant price advance into Labor