Taking Issue
I decided to
put out this mini report this morning because of what I am hearing
about Monday’s action. I am hearing a little too much about Monday’s
action being a great reversal day. I needed to take issue.
Now, we all know anything can happen.
No matter what we see, how we think…the market is going to do whatever it
wants to do. But to say that yesterday was a great reversal day is misleading.
The Nasdaq reversed. When a major
index is down 35 points and finishes up…it is a reversal. When the Dow is down
140 in the morning and is only down 22 points even with IBM being down 10…I
consider it a reversal. But that’s it. It was only a near-term reversal….not a
great reversal that normally leads to great things on the upside.
Where was the power?
“GREAT” reversals must have
volume. Why? Heavy volume on a reversal day means all the panicky sellers have
been taken out. In other words, everyone who wanted to sell…sold. There was no
compelling volume yesterday.
Where was the panic?
“GREAT” reversals have
spikes in bearishness. Put/calls didn’t budge. The VIX and VXN…not much going
on. The percentage of bullish advisors is going up, not going down.
I urge you to go back to the day the
market put it a good bottom on Sept. 21. It was a monstrous volume day as the
market reversed a large number. It didn’t get it all back but it got a lot back.
The VIX hit a number not seen since 1989 and was only higher during the 1987
crash. Put/calls spiked and needless to say, we were all dealing with and
wondering when another terrorist attack would occur. …not to mention talks of
recession, earnings…
That day did not insure a rally but
gave great signs that all the selling “HAD”
occurred. Here are my thoughts about yesterday:
The Nasdaq 100 went right back to
February’s lows. That would be a normal spot to bounce. After all, it did drop
from 1573 to 1342 in less than a month. The Nasdaq went right into the area of
support. The S&P 500 went back to its initial pivot point off the lows. My
best guess is that there will be some more upside testing…but it was not a day
that changes the playing field. There is just not enough conviction at this time
to really get things going.
There is still plenty of decent action
in FINANCIALS, REITS,Â
miscellaneous RETAIL, RESTAURANTS, and MEDICAL.
There is still a whole host of low priced and low volume trading stocks on the NEW
HIGH LIST.
I remain worried about TECH
because of the lack of good chart patterns and the amount of plain, old ugly
charts that remain…and look more shortable than longable.
Just continue to play it sector by
sector and stock by stock and beware of people that open their yappers without
historical precedent and solid facts.