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What would it take for me to become bullish. Just another 175 points up...
I wasn't going to write all this out until I got Jim Greening's note today.
I appreciate Jim's sharing and wanted to reciprocate. More members
of this list need to do more! This one's for Jim.
I'm mostly bearish (on the market in general, but not on some individual
stocks), but success means that one must be able to turn on a dime. I've
summarized below what it would take for me to become bullish in terms of the
Dow. The same kind of analysis could be performed on other major indices.
The rebound at 7349.99 on 10/13/97 may be viewed as technical (and magical)
only since many said that the 7350 mark was a major milestone. Still, the
magical low on 10/13/97 at 7349.99 is lower than the 10/31/97 low at
7352.69, albeit
only marginally. Seems to me that any bull would have felt better going
into the weekend with the Dow closing at least above 7580.85 (the low way
back on 9/11/97) let alone above a great many other important points. It
didn't do that (yet?). The Dow is gyrating right at its 200 day simple ma.
It seems to me that it's important to the bullish case that it move
decisively above this ma and I would think rather soon.
Too many people look at this simple indicator.
For the current rally to continue it needs to move higher than the mark set
on 11/5/97 before the next downward move. The things that need to happen
are all basic things: higher highs and higher lows and staying above the
200 ma.
One other note. Latest (11/17/97) IBD front page had a note that there was
a $1.1B outflow of funds from mutual funds for the week ended 11/12/97.
This
was after a inflow of 2.84B in funds the prior week.
If this wasn't enough, if you tilt your head to the left and squint just
right, it's even possible to imagine 2 variations of a DJIA Head and
Shoulders top emerging: 1) left shoulder=> mid-June 97, head=> August 1,
right shoulder=> early-October. 2) left shoulder=> mid-June 97,
double-head=> August-October 1, right shoulder=> NOW.
Boy am I crabby. <G>
I've posted a Dow chart showing that a trend line from late 1994 through the
present was broken on "gray Monday" and that the Dow is now lower than that
trend line.
ftp://emmetropia.com/pub/webm32aa/DJIA1994-1997.gif
Note1: the Dow Bars are daily Candlevolume bars. Don't know if this
is "valid" but it makes the case that I'm trying to make better than the
standard
approach <G>
Note2: The same kind of bearish rising wedge that Clive Roffey described as
beginning from the April 1997 low on the Dow can now be drawn in from late
1994.
(This is the first time I've used the public FTP storage on my new hosting
service. Someone let me know if it works.)
I've posted another-zoomed-in chart of the same Dow chart. The MA lines are
50 and 200 days, 2 simple and 2 volume adjusted.
ftp://emmetropia.com/pub/webm32aa/DJIA97-11-14.gif
If you move up into the parent directory, you'll find those few
Dow-Boo! .gifs that I sent out that everyone enjoyed so much. <G>
If the Dow doesn't move higher than its previous (11/5/97) high (this
next week?) but instead falls more decisively below its 200 day ma, I would
think that bigger players will be moving even more decisively to get
out...And if it doesn't move above that 11/5/97 high before moving down,
will the 7349.99 hold again. Hard to imagine...And then what? 7100?
Pure speculation: S&P500 futures trading limit down early this next
week before that 11/5/97 high is beaten. The bull nightmare: S&P Futures
trading limit down early Monday morning 11/17/97.
So, what would it take to make me near term bullish? A close above the
11/5/97 high before the next move down! Just another 175 points up.
In the present market context, I don't think there's a substitute for
reading through the first few chapters of any TA introductory text (Pring,
Murphy, Schwager (my favorite), E&M) to the chapter on topping patterns and
then getting out the old smoking jacket. <G>
Steven Buss
Walnut Creek, CA
sbuss@xxxxxxxxxxx
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