The Futures are pointing to an Nice Big Crap-up Opening as I write this
We are expecting loads of data, which is due out at 8:30 a.m. EST, this will be a potential market mover as market players look for signs on how well consumer spending is holding up at a time when the nation may be on the verge of going heading into the BUSH war. I also have a MAJOR turn forecasted for 10:00 this morning...which could be a continuation of yesterday's move...
Uncle Al the stealth rally maker injected a measly $10.0 Billion yesterday, which was good for 60-80 Dow points alone
While the snap-back relief rally has taken on a huge push The Dow reversed 140 points on Wednesday and added 270 +/- yesterday that is a reversal of over 400 points, while the OEX rallied almost 9 points and the SPX almost 16 points off their intraday lows on Wednesday and significantly added to their position yesterday. The fact that they came after the completion of the head and shoulders and while the bullish percents are sitting in oversold territory sure tossed up a big red flag for the bad-news-bears, and I warned folks of the potential for such a move, I hope my perma bear friends heeded my warning.
The big players were out yesterday with cattle prods in hand as they continued to turn the bulls, and they came back in a stampeding fashion into the markets yesterday for no particular reason, other than it’s our right to buy…they did so by ignoring more bad economic news. Was it the rumor of mass defections of Iraqi generals that turned the tide? Did Bush come out like Jim Carry and say “I’m only joking about going to War” I amazed at the 180 degree turn around with such magnitude… they sure had the bears on the ropes yesterday…I was further amazed that the World is pricing in a rosy scenario as well as spot Gold Fell precipitously this past week, about $10.00 yesterday alone hence they are already pricing in a peaceful solution and an end to terror…and great global economic solutions…I know I have been under the weather all week now…maybe it’s the meds I’m on I must be dreaming as I do not understand this disconnect.
Yesterday we saw a HUGE I repeat HUGE Reversal Candle when added to Wednesday’s action, if this is indeed the start of another Bear Market rally like we saw in October/January/February than we should expect another big day today…and we need to monitor the herd and process. Yesterday’s gains have stimulated the Europe/Asian markets to fresh gains after a deep sell-off and we should see a positive open today. The futures are up nicely and there was no real negative news after the close. The Nasdog chart above and I am sure you will see that very strong resistance at 1350. This is going to be a challenge to the bulls after a +61 point gain on yesterday. The next significant overhead resistance in the Dow is 7,910-7,920. Couple that with news that the UN vote or no vote; has been put off until Monday and the war until April, the giddy bulls may be dancing in the streets today. As I have said there are still shorts in the market and after being hammered yesterday and seeing the result of the Osama rumors this week they will NOT want to be short over the weekend. This should provide some fuel to the markets today.
This Market is indeed wild and the pent-up demand to buy is huge as we saw on the silly-ass techno-bubble heads as they swarmed back into technology stocks without any regard towards earnings or company liquidity…after two weeks of consecutive down days the Nasdog recovered all the losses in just a day with a 61-point gain…remarkable…and it has jumped up almost 100 points from the intraday low posted on Wednesday …we are moving into a huge overhead supply at 1,350 (OHR) and the only way to get over such a supply may be a GAP/CRAP scenario.
I would expect a somewhat bullish bounce today; if the economic data supports such an event. We also have what is referred to as a "forced bottom play" tactic by big smart money. Sometimes referred to as sharks as when they see potential bullish conditions ahead, and they are looking for a good potential entry point they try to force a near term bottom as they have done during the past several day’s of sell-offs by stepping away from the bids. They sell short stocks they really want to buy to try in an attempt to find a significant support level where buyers appear. Essentially they try to run and take out the stops and take out all the weak holders and then they find out where the real buyers are lurking. When conditions are ripe for profit taking they can accelerate this process and when the market stops falling they cover the shorts and go long. What a cute game they play huh. So basically a folk, the game is still on…they have seen a 5-10% rise in stocks is just a day or so, and we could see a continuation of such a play for a few more day’s unless news of WAR or pitiful data stops them short in their tracks.
On Wednesday 15% of the S&P set new 52-week lows and Volume was down 2:1 despite the end of day relief rally. This was almost bullish compared to the 18:1 down volume we saw on Monday. Yesterday the volume was over 7:1 to the upside with over 1.7 billion shares traded. This was the most volume in a single day since late November. Yesterday started out with a gap open and sold off to just above 7,600 before charging off to a break over 7,800. It was not a raging bull but more of a determined walk by the entire herd or a few key players controlling futures action. There were numerous strong resistance points broken at 7,600, 7,650, 7,750, 7,785 and even 7,800. Please folks make no mistake this orchestrated move was set up to appear to be a very powerful move…however it was not powerful enough to propel the new highs over the new lows which came in at 110 highs to 256 lows (combined NYSE/Nasdaq), but strong enough to get the bad-news-bears attention as they scrambled to cover. However I think many of them were in denial all day…and
I’m expecting a continued rally this morning…(unless the economic news knocks the crap out of the potential) as may bears will want to cover ahead of the weekend and incase this rally has legs…especially after yesterday’s denial outlook, as many have that deer caught in the head light look
I warned my subscribers of such a situation as on the morning of 3/12/2003 when I cautioned that “Folks this market is coiling into extreme oversold conditions...I have changed my bearish out-look to BULLISH and am recommending stepping into the DJX, OEF, SMH, OEX on the long side...(or for some their favorite high beta stocks) I believe we are hours/days away from a substantial relief rally” I believe that the oversold conditions created earlier this week were just too severe to be ignored prior to a Fed meeting once the war was postponed for maybe (key word maybe) delayed for 2-3 more weeks. As I pointed out Tuesday there was likely to be some strong asset allocation moves soon. I think it was the combination of all these factors that stimulated the initial move and short covering did the rest. However this quick magnitude is greater that I expected I thought.... such a move has no foundation and has left so many gaps.
I have also heard reports that the large drops over the last month may have created serious deficiencies in market makers option accounts and along with institutional traders and they are trying to square these positions by running the markets up.
The market was definitely not moving up on yesterday on great
economic news.
The Jobless Claims fell 15,000 from last weeks upwardly revised number of 435,000. Unfortunately that meant we still had 420,000 new claims and the four-week moving average has risen to 420,000. This was the highest level since December.
The Retail Sales fell a whopping 1.6% in February and well below the consensus estimates for zero growth. The consumer is not rushing out to hold up the economy and longer and is essentially starting a cocooning stage. However the Butt-heads were full of excuses why we had weak numbers reasons given were blizzards, high gas prices, unemployment, terror alerts and war fears.
Import and Export prices both rose primarily due to high oil prices.
Next week we have Uncle Al and his band of merry followers meeting on Tuesday and there is a 32% chance of a 25 point rate cut as predicted by the Fed Funds Futures. Not a big chance but the various economic indicators could be weighing more on the Fed than on consumers, as the job-less so-called recovery could implode upon them. There are some thoughts that if the Fed cut rates they would take a bigger cut of 50 basis points to send a stronger message. A minimal 25 point cut would have no impact and they have only a few bullets left in their gun. Plus with another 50-basis point cut they could stimulate another huge round of refinancing and expand the housing bubble even more. However the odds are much better that they will change the bias to easing and plan on a rate cut at the May 6th meeting if the economy stalls or plunges further, currently the Fed funds futures predict a whopping 82% chance of a cut at that meeting.
We are on the threshold of Confessional season/warning season and the onslaught should arrive next week but there were several high profile warnings yesterday that went un-noticed or were ignored.
TYC warned that it was slashing profit forecasts for 2003 and had fired a division president for accounting irregularities. The current chairman, Edward Breen, vowed to clean up the "crap" and that heads would roll if any more problems were found inside the company.
Schwab warned that current outlooks were too aggressive in light of trading volume that was continuing to fall. They declined to issue an outlook claiming no visibility. They said trades entered had dropped 20% in February to 101,000 a day and so far in March that number had dropped another 5%.
International Paper said demand was weak and getting weaker as the quarter progressed.
MYG said that demand began falling off in February and had been decreasing rapidly since.
Folks the mantra of a demand drop appears to be the common thread, sharp drops in demand across industries in February with increasing weakness into March…is a piss-poor economic sign. The main reason given for the yesterday’s today was the removal of the war premium from the market; and the starting date pushed off until at least April 1st ((Black moon) for a WAR…3/18 is a New Moon, who ever thought we would lift off then was kidding themselves…however the market is acting like the WAR is off…and I believe that it’s a 99% GO so I must be wrong.
Geo-Political News
This should have been disturbing…Dow Jones reported that Iraq has moved artillery capable of firing chemical or biological warheads to several locations just north of the Kuwait border. US officials said the artillery posed a direct threat to the US troops in the Kuwait staging areas. US officials also said Iraq was positioning surface to surface missiles in far western Iraq in an apparent attempt to use chemical or biological weapons against Israel. NBC reported that the US military was prepared to launch preemptive attacks against the new artillery and missile sites before the Saddam has a chance to use them.
TECHNICALS as noted YESTERDAY THURSDAY !!!!! NOTE my charts are hyperlinks and do not show up here !!
Head & Shoulder Objectives
Dow H&S Objective = 7,550 - 7,560 Chart Objective Attained, and we slipped a bit underneath the targeted objective, as we slid to 7,416.64, 134 below the objective before today’s late stage relief rally brought us to a close of 7,552.07, as we sit right on the threshold of the objective zone. We have now fulfilled the objective on 3/11/2003 and tested it on 3/12.2003…this action has plunged us into deep oversold territory on the Daily chart…%K = 8.06 and %D = 11.23, RSI = 35.7 and appears to be now turning up, the bottom of my BB band reads 7,535 however MACD has establish a bearish crossover…CCI indicates a near-term bottom may be forming. The Weekly Dow Chart, is also indicating that we are at significant support and it too is demonstrating over sold conditions, however there could be 1-2 more days of selling within this set-up…but both are enjoining and could establish a trend reversal.
S&P 500 H&S Objective 790-792 Chart Objective Attained, 3/12/2003, as today we dropped into the objective zone and with an intraday low 788.90, before a late day rally pushed the SPX up to 804.19, we have fulfilled the H&S objective, and will most-likely test it on Thursday… this action has plunged us into oversold territory on the Daily chart…%K = 8.97 and %D = 15.02, RSI = 37.3 and appears to be now turning up, the bottom of my BB band reads 803.51 however MACD has establish a bearish crossover…CCI indicates a near-term bottom may be forming…however we may have an additional day or two of selling before we reach extreme oversold conditions…however the proverbial rubber band is tightening. The weekly chart indicates that the SPX could fall to 768 before a potential bottom is formed, key word potential
S&P 100 H&S “OEX” 398-402 Chart Objective Attained, 3/12/2003, as today we dropped into really skimmed the objective zone and with an intraday low 400.24, before a late day rally pushed the OEX up to 408.92, we have somewhat fulfilled the H&S objective, and will most-likely test it on Thursday again, and maybe slide a tad below it (maybe)… this action has plunged us into oversold territory on the Daily chart…%K = 10.02 and %D = 15.92, RSI = 38.9 and appears to be now turning up, the bottom of my BB band reads 803.51 however MACD has establish a bearish crossover…CCI indicates a near-term bottom may be forming…however we may have an additional day or two of selling before we reach extreme oversold conditions…however the proverbial rubber band is tightening. The weekly chart indicates a retest of the October lows at 384 +/- could be in the cards
Nasdog H&S Objective 1,137-1,140 Chart Not even close yet (Intraday lows today touched 1,253.22, we are about 130 Nasdog points away from the H&S objectives, we closed at 1,279.47, and we may not make the confirmation plunge as yet)
NDX H&S Objective 810-815 Chart Again not even close yet (Intraday lows today touched 946.79, we are about 130 NDX points away from the H&S objectives, we closed at 970.54, and we may not make the confirmation plunge as yet)
The NDX bullish percent indicator coughed up another 2- point yesterday as it traded down to 30 yesterday, however this is still well off of historical bottoming zones of (8-20) NDX Bullish Percent Chart The S&P 500 Bullish Percent Chart showed that it has given up 1-points and is at 27.40 since my last comments and is trending into the potential reversal zones associated with bottoms (12-20) this bears watching The Dow coughed up 3+ points to post deeply oversold reading of 10, DOW Bullish Percent Chart, ).
The dollar has actually caught a little relief rally as well Daily Chart of US Dollar which helped to support the rally yesterday as well.
As I stated on Monday we saw a huge potential for a reversal potential…the NYSE TRIN Chart indicates that we have entered very extreme oversold on a short term basis, we closed at a whopping 5.93 on Monday, and current reading on the 5sma = 2.05 off of the 2.46 that we saw on Monday, the 10sma has increased to 1.82, and I believe was are just hours/days away from being deeply oversold on the 20sma/50sma this foretells a looming reversal ahead and it could be quite severe, the potential for an reversal increases when we look at the Advancing/Declining Issues charts as they are also pointing to a near-tem over sold condition as well NYSE A/D Issues Chart Nasdaq A/D Issues Chart
The Dow Transportation average was very weak again today before the late day rally, as we broke the October lows with a deeply disturbing intraday hit at 1,918.12l before the late day rally helped to lift the sector into the green, to 1950.65…but I do believe the bad-news-bears have seen the technical damage and may try to claw away tomorrow Dow Transports (daily chart); The weekly chart of the Transports is extremely buried in oversold conditions, and we could be near a significant relief rally zone, key word (could) Dow Transports (weekly chart)
Another favorite indicator of mine that has been pretty reliable in predicting trend reversals in the recent past has been the Mr. VIX he has been range bound between 32-34% and 39-41% for the past couple of months, with moves to those distinct zones signaling at least short-term reversals in the equity market. Mr. VIX, which we all know measures the underlying option premiums in the OEX; usually increases as the market drops and investors become more fearful and skittish we saw the upper end of that range has been between 40-42 intraday, and especially with a topping range of 50+/- wherein we have seen an a market relief rally. The 40 mark was hit again yesterday for the first time since February 13th, and voila! A relief rally was produced as yes. We had traded as high as 41.16 intraday, but finished the day at 38.99. Investors and especially traders should monitor this market indicator on their trading screens and exercise caution with their positions short/long as we approach Mr. VIX’s range extremes.
Uncle Al the stealth rally maker injected a measly $10.0 Billion yesterday…which helped to fuel the rally "Open Market Operations" .. So far this week he has injected only 20.5 billion when compared to last week where he had injected a whopping $27 Billion, .... I expect that Uncle Al will open up the wallet again today....I expect several 9-10 billion infusion today to mitigate the Bush guns are a blazing speech that was delivered last night.... The markets are still acting like a junky waiting for their next liquidity infusion. The infusion today helped to add some slight stabilization to the DOW, and kept it from dropping as quickly as it could of. The FED is going to start to have to deal with the liquidity issue surrounding how they are going to retract some of the HUGE injections that they have flooded the markets with since the WTC tragedy. Industry "bean-counters" have suggested that any daily liquidity infusions over $9.75-10.0 billion can have the effect of lifting the DOW (60-80 points).
As I have said for a week plus now !! A perfect Storm could be brewing, if we do not see a significant rally soon
Fund managers are a very sick cancerous lot of late as the fund industry and most of Wall Street thinks that we are in a new bull market that began last October…I do not share this view of course, I saw the rally as an deeply oversold manipulative bear-market rally…however at present Fund managers are sitting on the lowest cash reserves in decades. Many funds have had to procure additional lines of credit in an effort to keep up their respective buying power. And upon reflection they are still buying the same bubble-techno stocks that they have in the past…those so-called leaders in the last bull-run… (CSCO, INTC, MSFT, JNPR, DELL, JDSU, CIEN etc.) They are still buying overly valued tech stocks many in excess of 50 times future earnings in the belief that that there are greater fools out there who are willing to pay even higher prices, on any really that can be fueled. In other words, they believe there is a chance that retail is coming back into the market in a big way and once again they will be able to dump the crap into the arms of the foolish retail green-chasers they are still dreaming of the good old days and are hoping for another irrational exuberance aura. If they funds can-not manufacture a rally, they will be in dire straights, especially if they face redemptions…these fund managers have been taking massive doses of Prozac and smoking that wacky tobacco… as they are living in an illusion, if they can not obtain a significant rally, and soon. Now folks I may be dead wrong…but I have never heard of a new bull market emerging and a bear market ending with P/E ratios at 50-75, associated/combined dividend yields at less then 2% and worse of all mutual fund cash positions at record lows coupled with the majority of ding-bat fund managers and their investors fully invested…something is very out of whack here…Bear markets don't end that way, nor do bull markets begin under such erroneous conditions…we could be seeing the set-up for a huge purge on any signs of a relief rally in the near-term as war still is a reality along with potential terror events.
