What 1990, 1994, 1998 and 2001 All Have In Common
If the Nasdaq is going to be able to rally, it will likely need the help of
the chip sector ($SOX).
The SOX reversed nicely Friday to finish up 0.4%, and were helped out by a
resilient Novellus (NVLS).
Novellus has been in an uptrend since late November and traded as high as 49 1/2
on Jan 31 before pulling back.
What was constructive recently was Novellus holding above its 50-day moving
average during its pullback as it established a new trading range. Novellus has
been showing some solid gains in recent days on increasing volume.
This suggests that institutions may be picking up this stock, so I will
continue to see if the heavier-than-average volume continues and whether
Novellus can capture its 200-day moving average and break above its recent
trading range.
To further address the issue of whether the Nasdaq will rally let’s zoom way
out and talk about the bigger picture. Some weeks ago, I showed you a logarithmic
chart of the Nasdaq Composite going back 10 years. Since it’s a monthly chart,
not much has changed since then. But it’s worth reviewing because it reveals
some interesting potentialities.Â
All the major lows of the past 10 years, 1990, 1994, and 1998 came in off the
trendline I’m showing you. In late-February 2001 we are testing support off this trendline. The next few days may be an important milestone.
Factor this in with the three fresh CVR Signals with an upward directional
bias that Dave Landry told me will appear on the Market
Bias Page (check it on Saturday to confirm this).Â
Factor this in with Carolyn Boroden’s analysis which shows a cluster of time
cycles all
hitting between February 26 and 28. And whadaya know–today there’s a new moon.
Factor this in with a host of favorable macro-economic pieces of the puzzle
coming into play. I spoke with Tony Crescenzi this morning who explained to me
that double-digit growth in the money supply, a spike in corporate bond
issuance, a two-year low inventories, and mortgage refinancing being way up are precursors
to a new bull market.
I won’t pretend that I’m not tempted to be a twinge hopeful that the worst is
over. But it continues to be of the utmost importance to simply stay focused on
what’s there–not what we all hope for. This is a crucial juncture at which we
all have to watch for the market to confirm something. If we find support the
upside could be big. If we break down–you’ll have something to tell your grandchildren about.
Next week should be interesting.
In the meantime, I’m going to get all this off my mind this weekend and take
the family to Knotts Berry Farm.
We’ll see you on Monday,