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Index Wrap

The Squeeze Continues

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      10-04-2001          High     Low     Volume Advance/Decline
DJIA     9060.88 - 62.90  9187.37  9045.38 1.53 bln   1493/1648	
NASDAQ   1597.31 + 16.50  1641.56  1581.08 1.73 bln   1380/2243
S&P 100   548.45 -  2.15   557.16   547.22   Totals   2873/3891
S&P 500  1069.62 -  2.66  1084.12  1067.82             
RUS 2000  417.04 +  3.82   420.57   413.22
DJ TRANS 2210.98 - 11.88  2238.43  2204.53
VIX        34.40 +  1.30    34.57    32.98 
VXN        61.94 -  0.23    63.98    60.47
TRIN        1.18 
Put/Call    0.46

The Squeeze Continues
Contact Support

So does the spate of "good news". Another major airliner mishap prior to this morning's open, which caused many to speculate on a another terrorist attack, got U.S markets off to a negative start. Not helping matters was an unemployment report that showed 528K new cases compared to the 466K "expected". Of course also "expected" was that the figure would be way up in the wake of the September 11th attacks and resultant layoffs in the airline/travel industry. Still, the fundamental news does not bode well for a sustained bullish stock recovery. Remember, the market runs in cycles and has been cycling up for the last eight days. It may soon be time for bears to eat.

All the while, casino players had markets chopping and flopping their way upward until later in the day. Some adequate daytrades were available, but not without considerable risk of loss. For that reason, I stayed out. Yet that did not keep some of the beaten-down tech stocks from rising on DELL's announcement that it was comfortable with its earnings more than a month before the actual announcement date.

It is interesting to point out as Russ Moore did through Austin Passamonte in the Market Pulse today that Michael Dell purchased over $70 mln of his own stock last week and waited until this week to affirm the guidance. I guess he didn't want to wait for all of us to bid the price up first! It is good to be King and perfectly legal too. IBM, HWP, CPQ, and SUNW all rose too. Meanwhile MSFT rolled out its new Windows 2002 CE system with little fanfare.

But in the end, the mid-day strength that served to peg oscillators in extreme overbought territory was cracking. Yes, volume was strong again with the NYSE trading just under 1.6 bln shares. NASDAQ volume of 2.55 bln shares was even greater on Dell-driven tech strength. Despite the eventual losses on the Dow and SPX of 62 points and fractionally less than 3 points, respectively, advancers outpaced decliners on the NYSE 18:13.

After being the laggard for so long, the NASDAQ-100 actually closed up 11 points - no surprise for reasons noted above. But before we break out the pom-poms to cheer the bulls on for the long run, it would be good to check out the daily charts. On the other hand, today's easing has oscillators cycling down for perhaps the next bullish day or swing trade entry. Watch over my shoulder as we dive in.

Dow industrial chart (INDU):

For the Dow, we have a tug-o-war setting up. The 60/30 charts stochastics have cycled down better than half way to oversold, yet price not fallen substantially along with them. Add that to the ascending trendline on the 60-min chart that has formed a bullish wedge, and we could easily see 9000 as support just 50 points down from here, or less than that if the 20-pma at 9021 holds up.

Running against that scenario is the daily chart that made a "big ugly" in the bulls' feedlot. The "ugly" is the gravestone doji and the fast over slow stochastic cross in the severely overbought zone, which is almost always bearish. Bearish divergence is there too, which suggests the next probable move is to the downside. For the trading day tomorrow, perhaps a bullish day trade is possible, but bears appear to have the upper hand going into next week.

NASDAQ-100 chart (NDX):

Same story here with the NASDAQ. Short-term charts are weak, but selling is contained. Yet the bigger picture on the daily chart is showing a gravestone doji at the 20-dma, which also happens to be the bottom of a gap to be filled. While daily stochastic is still pointed up, filling the gap will be tough. CSCO and DELL have both said they will live up to their word earnings-wise. That leaves the unlikely duo of MSFT and INTC on deck to clean up the bases. Home runs from them? Not likely.

S&P 500 chart (SPX):

No difference on the granddaddy of indexes, the SPX. While there is historical support at roughly 1050-1055, the Bollinger bands may keep the downside action contained for some quick bullish trades. But if charts are to be believed, bears will soon rule the day as bearish divergence, historical resistance, a rolling stochastic and gravestone doji all suggest the downside is in the offing in the context of the bigger picture.

VIX is offering no clue except to remind us that the downward VIX trend is flattening out. With today's doji on the VIX, and its daily chart showing a bullish reversal from oversold, VIX, or fear level may be prepping for a move back up the chart to higher ground. It is worth watching at these levels as a move back over 35.50-36 would be a breakout and would indicate a big jump in fear over this week's levels. Bulls, beware the meat grinder.

For tomorrow, as alluded to above, the short-term charts have moved better than half way down in today's retreat from overbought, yet the candles remain at levels that suggest at least one more bullish day or swing trade is possible. But the daily technical pattern looms large and will not likely escape the bears' jaws in the coming week. If it does, many more will be tripped back into the bullish camp, perhaps adding some credibility that the recent rally may have stronger legs than many perma-bears think.

Only time will tell. See you at the bell.

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