Have A Chair Ready

June 15, 2001
Dave Landry

On Friday, the Nasdaq gapped lower and sold off
to test the well watched 2000 level. After a brief stab below, the
index rallied to the plus column. However, it found its high late in
the morning, and chopped around the rest of the day.

Looking to the weekly
(which I’ve been hiding from you), it looks like the index is trying
to turn back into the direction of the big blue arrow. Where’s that
6-year old? I need some advice.

The S&P tailed
down to near the 1200 (minor) support level but reversed to
close fairly well.

Looking to the weekly
here, it also looks like it may be breaking down.

The VIX tailed higher, and reversed along with
the index price action on Friday. This action sets up a CVR
III-Modified (and CVR I & III signals on the Market Bias Page).
This, combined with the 3-day TRIN reversing from relatively high
readings, a very oversold McClellan Oscillator, and a CHADTP buy
signal, suggests we could see a bounce.

So what do we do? The good news is, we didn’t
come apart at the seams on Friday. This helped to trigger the
aforementioned market timing buy signals. The bad news is, you can’t
ignore the big picture. The indices still look like they’re in
trouble. Therefore, if you’re nimble, look to play the bounce but wait
for confirmation in the tape. And, make sure you have your chair ready
for when the music stops. For those less adventurous, take a wait and
see approach. If the indices bounce back to the 50-day moving average
and begin to stall (over the next few days), then look for shorting
opportunities.

Looking to potential setups, Aviron
(AVIR),
mentioned Thursday night, closed well on Friday after a shake-out move
below the recent lows. This action suggests its uptrend remains
intact.