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Index Wrap

Double Espresso Would Do Nicely, Thank You

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       9-10-2001           High     Low     Volume Advance/Decline
DJIA     9605.51 -  0.34  9671.80  9493.55 1.46 bln   1140/1973
NASDAQ   1695.38 +  7.68  1702.12  1669.94 1.61 bln   1473/2277
S&P 100   558.58 +  4.69   560.72   546.93   Totals   2613/4250
S&P 500  1092.54 +  6.76  1096.94  1073.15
RUS 2000  440.73 -  4.46   445.19   437.50
DJ TRANS 2676.49 - 36.65  2715.04  2667.97
VIX        33.95 -  0.41    37.35    33.87
VXN        63.84 -  1.61    66.06    63.84
TRIN        0.69 
Put/Call Ratio      0.84

Double Espresso Would Do Nicely, Thank You
Contact Support

Toothpicks too to prop the eyeballs open please. For those who missed today's market action, nothing appears to have happened unless you are a daytrader, which presented some average opportunities for those fast on the trigger. For the position and long-term traders, count today among the many preceding it as untradable under the scope of an e-mail format dictated by the SEC.

For those keeping score, the Dow was unchanged at 9605 with 1.2 mln shares trading hands. The NASDAQ-100 too was unfazed, moving up only 11 points to 1365 on 1.6 mln shares.

A slight amount of short-covering could be seen this morning as the S&P 500 opened down to hit 1073 in the first 20 minutes only to rise from there to its high of the day (1096) by noon EST. A 23-point range, yes. But only tradable in the first half of the day before the markets chopped and sliced their way back to the starting line. Short and near-term signals are topping out and turning down again, with long-term charts failing to register anything but oversold.

Still if you were looking for news to move the market, a sliver attribution might be made on behalf of Qwest (Q), who announced 4000 layoffs, trimmed capital spending for the remainder of the year and by 30% for 2002, and warned for the fourth quarter. We can see some of the exuberance still left inside investors as the stock closed up $1.75 today. Why? All those cutbacks are perceived to mean increased earnings per share. Could it be that investors are starting the see the glass half full? Perhaps. The charts suggest so anyway.

But that is not really what makes the market do what it does. We have noted before and will note again, there are a myriad of fundamental reasons why the market will remain in a downward funk for the foreseeable future. Business stinks all over the word with the trajectory still headed down.

But that is a separate issue from stock trading, our main interest, which will fluctuate hot to cold, positive to negative, and up and down on any time scale we care to assign. It will do so on pure human emotion, which we can read in the charts. And the long-term charts, now deep in oversold territory, are signaling that some temporary upside is the next likely move despite today's failed "rally".

One other rant before I move on to our charts, the real meat of the Wrap. Of course, it's about unknowing, disingenuous analysts and why not to trust them.

The lesser of two idiots: Remember that storage company we all thought could do no wrong and that would grow forever because the Internet was on a growth trajectory to Mars? Yes, the same one, EMC, that has seen its stock price drop to $13 from $103 a year ago. Listen to this from CE Unterberg Towbin, analyst without any extra-ordinaire. They are maintaining their NEUTRAL rating on EMC and believe the downside is "limited". No kidding, it can only fall $13 max. Considering it is down from $103, it is impossible to fall another $90 as it has already done. Their belief is that poor demand and pricing will offer little chance of upside in Q3. Still CEUT cites some technical advantage over rival, Hitachi, which should improve EMC's kill ratio going forward. Apparently even analysts are holding their nose just to keep their name in the spotlight.

Then there is WF Van Kasper who upgraded EMC to STRONG BUY with some really excellent cheerleading. . ."leading the network revolution with executives aggressively positioning the company to dominate the world-class data storage software, hardware, and services, and that negative sentiment and uncertain global picture create an (this is so good!) 'unprecedented opportunity' to buy at a reasonable price." Oh boy, where do I get my fill? About the only buzzwords they missed are "pro-forma EBITDA", "sweet spot of the space", and "compelling value". EMC is a fine company, but their stock is a different story based on a current P/E ratio of 20 and no growth.

Enough! On to the charts, Dow first.

Dow Industrial chart (INDU):

Like just about everything we will see tonight, the weekly and daily charts are too weak to go long and too oversold to go short. The Dow remains treacherous, though the trading range can provide some profit opportunities for the quick of trigger finger. Some support is evident at the 9500 level and today's closing level of 9605 is just noise. Near term charts are weak with the 30-min forming a bearish wedge with stochastic values headed down. If it continues, look for the 60-min to lose altitude too. Daily and weekly still point to further weakness as they are pointed down, but it would not be unreasonable either to see these reverse soon.

NASDAQ-100 chart (NDX):

Once again, long-term weekly and daily charts finding support around 1350 (1339 to be exact), but the stochastics are still under water and have not yet shown signs of coming up for air. While the 60/30 stochastics have meandered out of oversold, the candles are showing no trend present other than chopping and flopping. With volume as small as it is and the 30-min chart forming a neutral wedge, there is no way to foretell the immediate future. No matter what, look for 1339 as support. While the long-term charts at support look poised to begin a rise within the next week, oversold can become more oversold until the oscillators run out of room and simply go flat as prices continue to fall. Odds favor a bounce soon before expiration, but we need not be in any hurry to jump on calls.

S&P 500 chart (SPX):

As for the real market, starting with the weekly/daily candles, support at 1080 continues to hold on a closing basis (green circles) signifying perhaps an end only to the immediate carnage. The oscillators, however, are buried in oversold and have yet to offer a hint of reversal despite that the 60/30 charts did their best bullish imitation off the opening low of 1073. Difficult to discern, but tradable for the quick-fingered. That said, even the short-term charts are looking tired. The 60-min has formed a bear flag that stochastics suggest will break down soon. The 30-min chart is already on its way back to Earth, but is meandering.

Clear as mud, right? Unfortunately, as traders we have to live with what the chart tells us. Sometimes, what the chart tells us is that it has no direction. This is precisely the time NOT to force a trade. There is no clear signal and trying to hope the direction of the market in our favor following a directional guess is a fast ticket to broke. Our job is trade the direction the market offers. However, though seldom said, it is our job too to sit out waiting for the high odds setup as the market tries to figure its direction. Again, catching falling knives is eventually messy. Wait for it to hit the ground before you pick it up.

One point of interest on the VIX. . .it went to a high today of 37, then fell substantially back to 33.95. Historically, 38 has proven to be a recent top and we may have hit it today. Then again, the lack of heavy volume and a no masse exodus of traders from the market yet suggests the VIX could rise to higher levels around 40. Or perhaps 61 if we go all the way back to 1998. By historical standards there is certainly fear, but we do not see that in a rush for the exits.

For tomorrow, I will be my usual forthright self and tell you that I have no clue of what tomorrow will offer. I know that VIX is high, but can go higher. I know the oscillators are oversold, but can stay that way longer. I know short-term charts are meandering their way mostly down from today's high. I know support, weak as it is, has held. Last, I know there is no economic news of consequence until Thursday. . .that is unless you count the decline of consumer credit and savings, which was supposed to hold up the business cycle. Now we have evidence that the consumer is about to fall, which could be just the sickle for whacking down some more market weeds.

Stay tuned, folks. Tomorrow is a new day, and only then can we draw a bead on the market's direction.

See you at the bell.

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