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Here are some pictures of how the market ended on Friday 7/18/97. Two
additional charts follow in separate post because of rt server 64K
limitation. It looked like a real washout with scrubbing still in progress
on the close. The attempted rally going into OEX settlement faded quickly
with the S&P futures well into sell program territory right up to and
beyond the close(see PREM chart). This is not the kind of market you jump
into on Monday morning and expect it to continue straight up. It is the
kind that will retest the lows after any early bargain hunting bounce.
This can take hours to days. The quality of the retest should be the
focus. Ideally what you want to look for here is another divergent pattern
between price and the McClellan oscillators as occurred back in early
April. The McOsc at around -56 is just barely on the oversold side of
neutral. If the typical complex bottom is to form then we should see a
rally back towards the zero line then a larger plunge to -90 or more, a
rally towards zero, another selloff with a higher low. So lets say on a
daily basis the quickest this could happen is up on Monday, down on
Tuesday, up on Wed, down on Thurs, up on Friday. That would put us almost
within the expected end of month pre positive moneyflow for the automatic
with holding types. Settlement is three days now so this current low could
be in place before the 29th.
Option premium ratios and put call ratios favor a negative bias for the
next few weeks. See Chadbury's comments at http://www.afund.com. Scroll
down the homepage to his commentary.
The VIX view is poised for a short term reversal dead ahead with the VIX
above its +2 std dev band, and the VIX Z score above the zone it typically
reverses in. The 5 day AMOSS has dropped to zone 3(neutral) and the 20 day
is still in zone 5(overbought). The 90 day is still chugging along at max
overbought. So all we are seeing right now is a correction and not a sea
change from bullish to bearish. Would want to see the 90 day start
dropping and the 5 and 20 drop into zone 3 and below. Bearish mode would
be identified with the 90 day hugging the bottom of zone 1 and the other
two making tracks in zones 1,2,3.
Another distinguishing track of the bull and bear is the nature of the
price spikes. Bull markets are typified by downward price spikes. Bear
markets are typified by upward price spikes. In other words the spikes are
away from the major trend. If you find buying the dips does not work any
more then you are flirting with claws. And if buying the dips is still
successful then you are romancing the bull.
BobR
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