[RT] Opposing Point Of View-"Chart Watchers Weekly" (HTML Version) for 06 July 2002

[John Cappello <jvc689@xxxxxxx>]

Title: Chart Watchers Weekly - 06 July 2002

I hope this comes through. It totally opposes my point of view. What 
else can I say except someone will be right.

John

    StockCharts.com's Weekly Summary of Market Trends, Signals and Changes 06 July 2002 Hello Fellow Chart Watchers! Don't be fooled by Friday's rally folks. The light volume is much more significant than the price action. Friday was a classic "vacation rally" - the most important Wall Street movers and shakers were out on holiday and their understudies were in charge. It reminds me of Disney's "The Sorcerer's Apprentice" for anyone that has seen the movie "

Fantasia". A much more important event occurred last Wednesday when the Nasdaq set a new low of 1336.06. The Nasdaq Composite hasn't been that low since the week of May 19th, 1997! Remember how panicked everyone was when the market dipped after September 11th. Wake up people! The Nasdaq closed below those levels twice last week. In fact, by moving below the 1350 level Wednesday, the Nasdaq also added a new box to its Point & Figure chart jeopardizing the double bottom pattern that many were hoping would provide some support. Remember: The numbers appear on a P&F chart whenever a new box is filled after the beginning of that month. Thus the "7" in the gray circle is the first box filled in the seventh month (July) of this year. Looking at a long-term Nasdaq chart created with a log-scale, 1400 creates a very plausible neckline for a Head and Shoulders top pattern dating back to 1996. The market is testing that neckline right now and another move below 1400 could be quite significant. Heros and Culprits To find the driving forces behind the current wave of selling, look no further than

our S&P Sector Carpet. After the carpet appears, I often drag the left edge of the date slider to the left until I see an entire month of data. There you have it - the top five "heros" for the last month include Palm, Worthington Industries, Oracle, Dollar General (interesting!), and Norfolk Southern. Unfortunately, they've been out-gunned by the largest "culprits": Qwest, Sprint, Omnicom Group, McDermott International, and Lucent. Of course, WorldComm went from a Large-Cap to a Micro-cap in that same time period and has therefore been removed from the chart. I know I sound like a broken record, but everywhere I look I see another reason for extreme caution with this market. The Technical signs are bearish and I do not see any indication that 1400 will provide the support that many are hoping for. While that is frustrating from an investor's standpoint, it is actually a very exciting news from a ChartWatcher's standpoint. Will the Nasdaq's huge H&S pattern complete itself this week? Will Friday's gains hold? I'll be watching the charts Monday... Don't forget, John Murphy, Arthur Hill, Richard Rhodes, and Carl Swenlin have more to say on the markets below.

      An Entire Industry 
About to Collapse?
      
        This is an industry that has been on a bull 
rampage for the last nine months and has now formed a large Head & 
Shoulders topping pattern. It's been a long time since we've seen a 
group of stocks set up in almost identical chart patterns. This 
consistency across the industry make the patterns more likely to 
succeed. 
        
      
      Click 
        here to see FOUR stocks all set up in H&S Topping 
patterns.

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Carl Swenlin's DecisionPoint Learning from Historical Breadth Charts With the markets setting new multi-year lows, I thought a little historical perspective was in order. The charts below show the behavior of the Dow Industrial Average and the NYSE Advance-Decline line during the market crash of 1929. Note that the A-D Line moved sideways prior to the big fall and then resumed mirror the movements of the Dow throughout the next several years. The bottom line is this, don't ignore prolonged divergences by important market indicators like the A-D line. Charts courtesy of DecisionPoint.com --Carl Swenlin Join Carl's website, DecisionPoint.com, for access to thousands of market charts like these including historical charts going back to the 1920s. Combine that data with Carl's no-nonsense advice and you have a winning approach to the market. Join today! Arthur Hill's TDTrader $XAU feeling the heat Even though gold and $XAU may be in a long-term bull market, that does rule out corrections along the way. Since mid November, $XAU advanced from 49 to 89 without much of a correction. A 62% retracement would project a correction back to around 65. In addition, there is resistance-turned- support from the Sep-01 high and Mar-02 low around 60. Looking at the daily chart, $XAU formed a rising flag in late June. The index declined from 89 to 73 with a sharp move. The flag retraced a little less than 50% and the lower trendline break (magenta line) indicates a downward continuation. Using traditional technical analysis projections, the decline is forecast to around 65 (89 - 73 = 16, 81 - 16 = 65). For more of Arthur's intuitive commentary, check out his website: TDTrader.com Take your TA to the next level! During the month of July, Arthur is offering a two week FREE trial of his website. Take advantage of this free offer today! The Rhodes Report The recent weakness in all the major indices have taken prices to levels not seen since the intermediate term lows were formed in Sept-2001 and even prior. This is due to an economy that is stagnating relative to expectations, this is due to a loss of confidence in value of equities as an asset group - and as such prices are accorded lower values relative to those seen in the past. However, as interest rates move lower - the relative value of equities increases - but the lingering question is whether that will continue to be the case given current attention accorded corporate malfeasance. Ultimately, equity prices will rise, but we believe they will rise from lower levels, and the time period for which they do so may not be too far off in the future. When we examine the weekly chart of the Dow Industrials, it is quite clear that prices are trading at levels that existed during 1998 - thus profits have yet to accrue to the long-term investor. However, we believe the time frame is rapidly approaching in which the potential for an intermediate-term rally is upon us. It may begin from much lower levels, but we believe that support in the Dow will be found at the the 25-week moving average envelope (offset 13%) currently trading at the 8700 level. A test of this support in conjunction with a turn higher in the 14-week stochastic would definitely be constructive from a technical point of view. But, we will note that a larger "head & shoulders" top formation exists, of which a break through the neckline at 8500 would have significant implications over the longer- term. Good luck and good trading, Richard Rhodes If you want more of Richard's award winning advise, check out his website: TheRhodesReport.com - Highly recommended! John Murphy's Market Watch LEADERS CONTINUE TO TOPPLE TESTING 200-DAY LINE... Of the nine S&P sectors that we follow (in our Market Carpets), eight have already fallen below their 200-day moving averages -- putting them in bear market territory. The only one that hasn't broken that long-term support line (yet) is Basic Industries. But it is testing it. The chart below shows the Basic Industry SPDRs threatening the 200-day average -- and the April low on Wednesday. Part of the recent downturn came from selling in gold stocks, which had been holding the group up. ROTATE WHERE?... One old market maxim holds that bottoms can't form until all the leaders have peaked. The problem is that puts the market at a crucial spot. If the leaders peak, something else has to pick up the slack -- or things can get a lot worse. Former market leaders (like HMOs, homebuilders, small caps, etc) appear to be rolling over. The big question now is whether money starts rotating into some oversold groups. Very often, rotation out of a top performing group leads to rotation into the worst performing group. So far this year, Basic Industries have been the top sector -- gaining 23%. Technology has been the worst -- losing 22%. We're not predicting that technology will rally from here. If it doesn't however, things could keep getting worse. The sector that is most oversold at the moment is Consumer Staples. The chart below shows the weekly RSI for Consumer Staple SPDRs in oversold territory -- under 30. Unfortunately, it has just fallen below chart support formed during the first quarter of 2001. There's an even older market maxim that when everything is falling, CASH IS KING. John Murphy posts charts like this every day on his website, MurphyMorris.com. Get the Full Power of StockCharts! This free newsletter is sent out by StockCharts.com. It is just a taste of the information and capabilities that our members have at their fingertips. Only one-fourth of the people receiving this newsletter subscribe to StockCharts.com. If you are seriously interested in using Technical Analysis to improve your market performance, you owe it to yourself to subscribe to our charting services - either "Extra!" or "Basic". Click Here for More Information Don't miss out on the full power of StockCharts! Are You New To StockCharts.com? Here are some links that should help you get started: A Quick Tour of the Site John Murphy's 10 "Laws" of Technical Trading Chip's Thoughts on Getting Started with Technical Analysis All About Charting and Technical Analysis Our Mailbag Column is full of great tips and advice. Bored? Check out our SharpCharts Voyeur page to see recent masterpieces that other users created on StockCharts.com Help Us Out! Did you know that the best way you can help StockCharts.com is by recommending us to a friend? We need your help to spread the word about our site by forwarding this newsletter to everyone you know. 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