Why I Think That The Market Is Not Headed Higher

January 3, 2003
Dave Landry

On Friday, the Nasdaq chopped back and forth in a narrow
range. This action keeps it right at its 50-day moving average.

The S&P put in similar performance. It remains
just above its 50-day moving average.

The VIX is now stretched 10% away from its 10-day moving
average (a) and its high is less than that average (i.e., a CVR-III Sell signal).

So what do we do? The media continues to celebrate as
if the year is over. Yes, statistically, the market that starts with an up
January finishes the year higher. However, number one, January ain’t over yet.
And number two, “statistics are worthless, 75% of all people know
that.”* Looking to the charts, the semis, in spite of their impressive
bounce over the last two days, still look like they have the potential to
continue their rollover out of a big-picture top. Retail also looks poised to
continue its rollover as does biotech. Further, as it has been lately, most
stocks look like better shorts than longs (with the exception of the gold
stocks). Therefore, look for shorting opportunities but wait for entries just in
case the “big boyz” try to jam in higher when they return from their
extended vacations.

Looking to potential setups, Genesis Microchip
(
GNSS |
Quote |
Chart |
News |
PowerRating),
in the aforementioned semis, looks like it has the potential to continue its
downtrend out of a pullback/inverted cup and handle-like formation.