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Index Wrap

All Bush News All of the Time

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      12-04-2001          High     Low     Volume Advance/Decline
DJIA     9893.84 +129.88  9893.84  9743.05 1.31 bln   2185/ 928	
NASDAQ   1963.10 + 58.20  1963.22  1913.92 1.87 bln   2282/1324
S&P 100   585.63 +  6.97   585.63   577.90   Totals   4467/2252
S&P 500  1144.80 + 14.90  1144.80  1128.86             
RUS 2000  467.84 + 10.81   467.85   457.03
DJ TRANS 2534.85 + 51.79  2534.90  2478.78
VIX        25.33 -  0.67    26.92    24.78 
VXN        48.09 -  1.65    50.55    47.66
TRIN        0.65 
Put/Call    0.54

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I think the "NBC" in CNBC stands for "National Bush Channel". Don't get me wrong. I am not knocking the President. In fact, I rather like the guy. My beef here is with CNBC, a cable business news channel that devotes an inordinate amount of airtime to every Bush appearance around the country instead of business.

Nowhere else can I remember a specialized cable channel breaking their programming on an almost daily basis for a Presidential town hall meeting. It does not happen on Home & Garden, A&E, HSN, MTV, The History or Learning Channel, nor HBO or Showtime. It especially does not happen on Bloomberg TV or CNNfn (except in rare instances), where they stick to their format - business.

For the times that it is important to cover the President, leave that to the major networks, CNN, or FOX. It's their job. But even they do not carry all matters Presidential with such frequency. Word to CNBC: Stick to what made you good from the start - thorough business reporting and corporate sleuthing. The more you cover the President, the better your business channel competitors look.

Well look at that. In my diversionary grousing, the markets rallied! But that was never apparent on CNBC. CNBC or not, the rally just kind of snuck up on us. No bad news, but markets have hung in there anyway when bad news rears its head. No news at all? Markets have tended to rise. That bad news is acceptable and the absence of good news is bullish, I am hard-pressed to believe that markets will fall anytime soon. So what happened to spark 129 points out of the Dow, 66 points out of the NDX, and 14 points on the SPX? The short answer is technicals and a short squeeze.

First, let me preface my thoughts with a note on volume. It has not been particularly strong on the NYSE and NASDAQ, and today was no exception - 1.3 bln and 1.9 bln, respectively. Adequate and usual, but by no means spectacularly light or heavy. That it was not heavier on today's gains makes me suspicious that the markets will use the recent consolidation as a launching pad to new recent highs. They may not. On the other hand, the market has remained resilient in a clearly crumbling fundamental picture. For that, we can thank the Fed for all its practically free money and cheap rates that have flooded the market with liquidity.

While I may believe that the Fed's action will end in failure, I see that markets don't care about that or the underlying fundamentals. Meanwhile, investors take Alphonso The Great's liquidity train for a ride. Reality be damned; we've got a train to catch!

So back to today - a well-noted milestone was reached in that the COMPX broke through its 200-dma of 1949 to close at 1963. The real assault comes at 2000. While 1949 diverted attention from pressing matters - a diversion that had a few shorts covering - the more important NASDAQ-100 (NDX) is still 16 points shy of its 200-dma of 1650. Likewise, the Dow is 253 points shy and the SPX is 33 points away from their 200-dma's. Those three are the ones that count, not the wasteland of has-been tech stocks still littering the COMPX with sub-$5 price tags. While the sensationalism makes for good journalist fodder, as the saying goes, "don't count the chickens before they hatch".

But hatch, they might! Let's focus for a minute on the sentiment as it relates to the charts. There are some signs that bulls still retain the upper hoof despite fundamental reasons that scream otherwise.

Dow Industrial chart (INDU):

Weekly chart on the Dow suggest that its time to roll over, but that is nothing new. The daily chart has my attention with continued support at or near the ascending trendline over the past few days. It happens to coincide with the 50% retracement bracket too. The stochastics have reversed back in a bullish cross to boot. Put another way, price was holding steady as the stochastic was declining. That says the moves continue still in favor of the bulls. Note the 200-dma (gray descending line at 10,148). There is plenty of room for upside on any followthrough. As I've said before against my "best" judgment, and will repeat again here, (gulp!) dips are buyable for now until proven otherwise (I can't believe I said that. . .again.)

NASDAQ-100 chart (NWX):

And what have we here on the NASDAQ causing all the excitement? Same thing except the 200-dma is in much closer reach for the NDX. But if anybody can trade using the daily stochastic, please share your secret with the rest of us. Still, conflict is in the chart. While the NDX broke to a new recent high and the ascending trendline remains intact, the candles are threatening the upper Bollinger band and 200-dma. It's cousin's (the COMPX)) break over the 200-dma means little for this and the other indexes. Watch the NDX's 200-dma - it holds more meaning.

S&P 500 chart (SPX):

The SPX is telling the same story. Weekly charts are begging for a roll over while the daily hangs in there. Similarly to the other two charts above, the 50% retracement is holding while the stochastics have fallen and bullishly reversed today. No threat or test of the 200-dma here, though this is where it really counts.

Let's check the VIX while we're at it - hmmm, 25.33. Still stuck in the middle with a wall of worry for bulls to climb, which I think they will for now. Speculation will be excessive (as though it isn't already) when the VIX falls back under 23. Then I might be more comfortable with puts and going short.

Meanwhile, I can't take my eyes off the weekly, overbought chart. Since the bear market began in April 2000, the stochastics have not remained any longer than 5 weeks in that condition before a sizable bearish reversal ensues. That leaves about 2 weeks (if all goes according to theory) for the VIX to fall toward 20 and the indexes to reach overbought daily stochastic readings and retreat south from their 200-dma's once there. Take that with a grain of salt since every time I've suggested something similar, the bulls keep charging and prove me wrong.

Once again and still, the bulls continue to advance and prove my beliefs wrong. If there ever was a time to understand Jeff Bailey's now famous line, "Trade what you see; not what you believe", this is it. As long as Greenspan is flooding the Street with liquidity, fundamentals won't matter. Only the patterns on the charts will, and the patterns remain bullish for traders.

I want to close by noting that perma-bear, Barton Biggs was out today with his usual un-minced words. He bluntly noted that we are in a bubble again and that the current bull run has been way overdone. Amen Barton! I agree with him, which leaves me mostly alone against the prevailing notions on Wall Street right now - a real Underdog of sorts. Remember that cartoon theme song?

"When in this world the headlines read
of those whose hearts are filled with greed
who rob and steal from those who need
to right this wrong with blinding speed
goes Underdog! Underdog! Underdog! Underdog!
Speed of lightning, roar of thunder
fighting all who rob or plunder
Underdog. Underdog!
One day, I'll be right. Heck, even a broken clock is right twice a day. Until then, I trade what I see, not what I believe. (I see bull.)

See you at the bell.

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