Break Out The Prozac!
So let’s see…another reversal
day on another Friday. Is this what Fridays are
going to be like going forward? Break out the Prozac!
Let’s take a walk backwards. On Friday, June 7, the
reversal had two key ingredients…price
and volume…but was missing one important ingredient…bearish
sentiment. At that point in time, I did not feel the reversal
was meaningful…nothing more than a market that was tired of selling.
At that time, I thought the rally was out of weakness and not out of
strength. At that time, I believed the
technical condition was still horrid…and
not to expect much.
Fast forward to Friday, June 14. Well, if you are the
long-term buy-and-hold crowd…if
you are Abbe Joseph, Ed Kerschner or Joe Battipaglia…I am going to
disappoint you again.
I absolutely believe there will be some upside testing
here…but let me be blunt: two
out of three ain’t bad, but that’s not enough. I DON’T
THINK A LOT HAS CHANGED.
The missing ingredient this time was volume. Volume lagged in the latter
part of the day…therefore, until something changes, one has to worry
about the conviction of the buying crowd. In order to turn down markets,
you not only need panic selling…which somewhat happened early Friday…but
buyers have to get hungry. So far…nothing doing. Price movement
on Friday was good, sentiment measured by VIX, VXN,
PUT/CALLS, and INVESTOR’S
INTELLIGENCE were better, but the lack of volume on the move worries
me.
All in all, just based on Friday’s move, I expect more
upside. Stocks are way below
their moving averages and have to rally somewhere. I still believe
this is a rally out of weakness and not
strength.
Some more factoids.
All major indices are trading below their respective
200-day averages.
There are now walls of resistance ahead. When support is
broken, support becomes
resistance. The Dow’s resistance is in the
9600-9800 area…
…the S&P
500’s
is at 1050-1070…
…and the Nasdaq
is at around 1600-1610.
Most of the 197 groups I follow are below their 50-day
average. This must change for me
to get the least bit positive. Most stocks are also below their 50-day average.
There are more stocks…by a mile…in poor technical
condition than ones in good condition.
World markets are gagging. JAPAN
has broken down and most others have broken below
important basing areas. Check out a chart of the FTSE 100.
Look at the break below 5000.
OUCH!
Strategists refuse to give in. The zipperhead on CNBC said
this morning to “just buy
stocks.” Sure…just bet on Mike Tyson!
Advance/decline figures have fallen off a ledge.
No quality breakouts whatsoever.
Lastly, you are going to continue to get inundated with
ads that say:
“If you miss the best 10 days of the year, you will
miss out.” They forget to tell
you how much better you would be if you missed the 10 worst.
“We believe the fair value of the
S&P 500 at the end of 2002 should be 50% above
the index’s level today.” That was Paine Webber’s full-page ad from
last year. The S&P would now have to move
80% for the ad to be right and approximately 20% just to get back to the point
where the ad was written.
I have no preconceived notions about when and if and how a
new bull starts. I just know it
doesn’t start from these conditions. If things change…and for everyone’s
sake, I hope it does…I wholeheartedly expect to be on it. You can’t
hide institutional buying…and when it happens, it will stick out like
a sore thumb.