Today Is What Counts
Time again to
go deep…deep…deep into the market. Time to get extensive, time to
get comprehensive. Let’s get the negatives out of the way first…and there
aren’t many.
First and foremost, and as I have been
stating in my last few reports, the Nasdaq, and
more specifically Technology, continue to lag and
lag badly. In fact, while the Dow has broken
out to an intermediate-term high and the S&P
is on the cusp of it, the Nasdaq can’t get past a short-term high. Let’s take a
closer look.
The first short-term obstacle for the
Nasdaq would be 1946, Monday’s high. Farther down the road, a move above 2100
makes this move more intermediate in consequence and would certainly confirm the
rest of this market’s move. Areas of the Nasdaq that are strong are Financials
and now Biotechs look to want to take another leg
up. But that’s where it stops.
Anything can happen…but as of this
second, too many Techs are not only acting ugly in
the face of this rally but are breaking down. Here are just a few.
Sun
Microsystems
(
SUNW |
Quote |
Chart |
News |
PowerRating) can’t get off its back…and why are
insiders still selling at these levels?
Cisco
(
CSCO |
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Chart |
News |
PowerRating)
has a wall between $18-20.
Emulex
(
EMLX |
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Chart |
News |
PowerRating), which led off the lows, looks like it is being bought by Enron.
I can go on and on…but as of this
second, there are many good-looking shorts and hardly any longs in
Techland… so go slow. I have no idea whether the strength of the rest
of the market can bring the TECHS out of their
doldrums…so far…nothing doing.
I would continue to avoid almost
anything in Computer, Telecom and Wireless.
The only Tech area that is showing strength is
several of the SEMIS. Please look at my thoughts on
(
KLAC |
Quote |
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PowerRating) from my past
couple of reports.
The BOND MARKET
has broken down. I expect bounces, but I believe a longer-term top has been put
in. This should not have short-term implications, but longer-term it will be
something that needs to be watched.
The Dollar (see
the BOND MARKET).
The Fed is done.
The next move will be a tightening. Why do I mention this? According
to most pundits, the lowering of rates is always supposed to help the
market and a tightening of rates is supposed to do the opposite. Well, let’s
hope this time is different. I mention this because after 11 Fed rate cuts,
the markets are still down. In fact, the Nasdaq and the S&P 500 are still
way down. But don’t expect to hear this anywhere else. If the markets fail
to rally after 11 cuts, then what? Food for thought.
Sentiment is getting awfully bullish. The
percentage of bullish advisors is now
at 52.1%, a number bordering on the extreme. The VIX and VXN are very low.
Keep in mind, these are secondary contrarian indicators…and usually lagging
indicators. I will watch the markets and their action first, but I will
not ignore these numbers. The masses are most always wrong.
Now…for the positives.
The Dow has
already broken above intermediate-term resistance at 10,300. It is
now putting in a high, flat handle.
Volume has been quiet in the handle…which
is constructive. A move above 10,700 only makes things better and
lets it assault the 11,000 area.
The S&P 500
is putting in a perfect cup and handle. A break above 1177 would be
extremely bullish and confirm the Dow’s move and put in a longer-term “head
and shoulders” bottom. You can see this on a three year, weekly chart.
With more Big-Caps
acting well, this could happen sooner rather than later. Financials
are kicking in gear. One hundred Banks and S&Ls
hit the New High List today, as
well as a bunch of miscellaneous Financials. Keep
in mind, many of these names trade
1,000 shares/day but there are still many that trade well. It
is not very often the market gets in trouble when
Financials are acting well.
World markets are going along for the
ride. Japan is cooking in the face of a ton
of skepticism. Very few
sectors are in poor shape.
Lastly, I don’t know what life will
look like a week, a month, a year from now. I just know things are shaping up
quite well right now. Like you, I have been conditioned by the market to be
scared, to look over my shoulder and to think about the devastation that has
happened the past couple of years. I urge you to try and get past the last two
years. The reason I am saying this is because of what I go through every day.
It’s OK to think about the past, but “today” is what counts. If the
markets turn tail and head back down, it will give clues. As long as you cut
losses short, you will not have to worry if more carnage is around the corner.