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I wonder how much of this rally is options related and due to some unwinding of
positions. If the short stock was taken in first and then the calls sold, that
would fit with today's action in the stocks you mentioned. Right now the Dec
SnP is at 1159.50, this is 1+ point from my projection of 1160.90 given a week
or so ago. It would be a good place for a retracement. As long as the down
move does not exceed 71 points the up leg is still intact. this does not mean
that there will not be a tradable down leg. As stated before the next 2 upside
targets are 1169.60 and 1177. Your graph also seems to indicate a rising wedge
pattern that is not very bullish either. Good luck next week. Ira.
G.John Boggio wrote:
> Realtraders,
>
> I just thought I would post some thoughts regarding the S&P. Attached is
> a 60 min chart of the Dec S&P Futures (SPZ8). After a phenomenal run from
> the October 8th lows, this market appears to be getting tired...most of you
> are probably saying, "that's obvious", but at least here is a chart to help
> confirm 'the obvious'.
> Simply, take a look at the RSI oscillator that has been showing the
> presence of a divergent pattern for the last 2 weeks. Further, with the
> most recent price action, one can clearly see that the oscillator is having
> extreme difficulties as prices continue to move higher. Typically, when we
> see such divergent patterns that correspond to several weeks of price
> action, one can usually expect a reversal in prices. In this case, the RSI
> made a high on Oct 16th. As prices continued to move higher, it was NOT
> confirmed by the oscillator during the period Nov 2-6. Hence, the market
> had a 'small' pullback from 1150 to 1120. Then prices once again moved
> higher. Making a new high, which was AGAIN unconfirmed by the RSI (this
> can be seen by the RSI highs of Nov 17th). Finally, today we again moved
> higher in prices but the RSI is having trouble getting above the Nov 17th
> high, let alone the Oct 16th high (see the downward sloping trendline on
> the oscillator).
> Thus, using this KISS (keep it simple stupid) method of analysis, IT
> LOOKS TIRED! As most of us know, this rally in the US stock market has
> been driven primarily by the technology and Internet stocks (not to mention
> some financials, healthcare, biotech etc). As of the close of today's
> action (11/19/98), many of those Internet stocks reversed late in the day.
> For example: YHOO traded up to 198 today but closed down 4 to 186. AMZN
> hit a new high of 175 and then closed down 11 to 153. NSCP hit a new high
> of 45 but closed at 36.50 and AOL hit a new high at 90 but closed back at
> 83.63.
> These are just a few examples, but if it is any indication of investors
> becoming tired of paying ridiculous prices for some of these 'high valued,
> speculative stocks', day after day, then maybe they will become a little
> more cautious and look to take profits after many of these stocks gained
> well over 50 or 100% in the last month.
> Personally, I bought many of these stock back in early October but
> already sold them into their rally several weeks ago. Now I am just
> looking of an opportunity to buy them back but at least 25% lower from
> their recent highs.
> Finally, my 'opinions' on the resulting decline indicate that the bull
> market is again in motion. As such, this projected decline should be
> minimal, with the SPZ8 pulling back into a zone around 1070 to 1110 or
> approximately 500 points on the Dow. At which point, I will try to be 100%
> invested in the market with an upside target of Dow 10000 during the first
> quarter of '99.
>
> Thoughtfully,
> John Boggio
> PS. Just to clarify, I am not trying to call a top today, but I am
> suggesting that a pullback may begin in the next few trading days.
>
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>
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