Weekly Technical Commentary by Art Huprich - Wednesday Morning 01/14
Here are the Bull-Bear advisory sentiment readings that came out on 1/14/09, along with a thought of my own. These figures are derived from investment newsletter writers and are produced by Investors Intelligence: “The Bulls rose for the sixth week in a row to 43.0%, up from 41.8%. A slightly higher level was shown for the Bears, at 34.4%, up from 34.1%. It was only several weeks ago that we saw deeply pessimistic readings. Sentiment readings can still be called bullish. New bull markets (This writer does not think we have started a new bull market, but are in the midst of a multi-month/multi quarter base building period) often start with a jump in the bulls and a drop in the bears. The spread between the bulls and bears was little changed at +8.6%, still bullish. That difference will have to expand to a much higher level to turn bearish. At the October 2007 market high, there were 40.6% more bulls than bears.”
Regardless of the Bull-Bear statistics shown above, the DJIA recorded almost a dozen moves on both sides of the “unchanged line,” yet finally closed lower by 25 points. The “senior index” was unable to absorb the news related declines by AA, DIS, and BA. The NASDAQ gained almost eight points. On the NYSE volume was basically flat at 1.29 billion shares, yet advancing volume lead declining volume. There were 197 net advancing issues. While the “internals” were okay yesterday, the real problem, especially when it comes to identifying sustainable leadership, is the dearth of new 52-week highs. Conclusion
In light of five consecutive “down days” by the DJIA, I must admit that yesterday’s multi-swing session with decent internals, was encouraging. However, in light of sharply lower futures prices prior to the open this morning, the burden still rests on the shoulders of the Bulls.
Since I am leaving the office tomorrow, for the balance of the week, I want to repeat what I said yesterday. Specifically, “The short-term “line in the sand” support levels for the DJIA and SPX are 8347 and 851 respectively. A violation of these levels (aggressive accounts can use intraday prices, conservative accounts can use closing prices), would lead to a more defensive posture. I say this because a violation of those support levels would, in my opinion, produce a test of the December 2008 lows (DJIA = 8118, SPX = 815) and even increase the odds of another retest of the October – November 2008 lows. Please recall a retest can occur slightly above or slightly below the previous low point(s)”.
As one Wall Street veteran said yesterday “Now we are at ‘put up or shut up’ condition. The bulls need to circle the wagons to save the rebound rally. Should they fail and the S&P dip below 850, it could mean another down leg and a potential retest of the lows. The next few days could be critical.”
Consistent with this, A) please don’t let a profitable trade turn to a loss. Get out “breakeven”, at worst. B) Don’t feel like you need to trade every day. C) Tighten trading stops or take some trading profits and raise your stops on the balance.
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