What The Wrong-Way Crowd Is Saying Now
The internals of the market continue to worsen. Before I even
start, we must talk about last week as the action could have been the “shot
across the bow.” The holiday action is almost always up. If the markets can’t
rally when they are oversold and during the typically strong holiday week, then
things could be even worse than I thought. Not only was it not up, but last
week’s action was very worrisome. A few things happened that are worthy to look
at. First off, most days were up…only to close badly. Secondly, the major
averages failed just under their respective 50-day moving averages. Lastly, not
only did the market gag, but we are now starting to see the major indices and
many stocks approaching support and some important names break support.
Before I get into the technicals, I want to talk sentiment. Bullishness is still
rampant. As you know, this is not good. All my sentiment indicators continue to
be, at best, complacent…and some are downright flashing red lights. These
sentiment indicators have called the market beautifully for me.
Bullish advisors are
still hovering around 50%. At the October lows, this figure was approximately
25%. The wrong-way crowd continues to get it wrong.
The VIX and VXN remain
at low readings.
The same for put/call
figures.
My strategist index is
alarming. Even though they were woefully wrong last year, Wall Street
strategists remain bullish on 2003. What’s that line about the broken clock?
Now…let’s get in-depth
into the market. Ignore these charts at your own peril.
The three major indices failed right at their 50-day moving averages. This is
negative number 1.
Now, let’s draw a line
on the Dow at approximately 8250 going back
to Oct 17. Then draw the same line for the S&P 500
at approximately 872. Next, draw that same line on the
Nasdaq at 1320. Very simply, do you see any support underneath these
levels until the July and October lows? Not! This does not necessarily mean the
market must revisit the lows, but the fact that their isn’t any underlying
support gives it a better chance.
More and more past leaders continue to break down. Here are some of the latest.
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On top of many leading
names topping out, it is time to look at what people call “market stocks.” These
stocks have a large influence on the major indices. Here are some Dow stocks.
(
IBM |
Quote |
Chart |
News |
PowerRating) — Fails at 50-day average and is in the midst of breaking below
important support.
(
C |
Quote |
Chart |
News |
PowerRating) — Also fails at the 50-day and breaks near-term support at $36.
(
MMM |
Quote |
Chart |
News |
PowerRating) — MMM, which has a large influence, is putting in a broadening top
and could be about to break down from a reverse cup and handle.
(
MSFT |
Quote |
Chart |
News |
PowerRating) — $52.50 breaks support and possibly takes it down to $50.
The
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) would break support at 291.
The
(
BBH |
Quote |
Chart |
News |
PowerRating) [Biotech HOLDRs) fails to break out and then breaks down below its
50-day average off of a flat base.
The
(
$XLF.X |
Quote |
Chart |
News |
PowerRating) (Financials) fails at the 50-day and is on the cusp of
breaking down.
I can go on and on, but you must have gotten the hint by now. The charts are
speaking loud and clear. The markets must put up a “goal line stand” right about
here. Monday and Tuesday could give the market a little reprieve…but I would
not give it much weight. Could the market hold these levels and turn back up?
Sure…the market can and will do anything it wants…but I doubt it. Odds favor
a move lower…and quite likely in the coming sessions.
How am I playing it? It’s called no longs and short the daylights out of the
market and stocks…but only as they break below support levels. Of course,
stops on everything.
I will be appearing on a special New Year’s Day one-hour edition of “Cashin’ In”
on Fox News Channel. It will air on Wednesday at 4:00 p.m. ET and will repeat at
1:00 a.m. ET Thursday morning.
At this time, my entire staff, family and I want to wish each of you a happy,
healthy and profitable new year.