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This is a a supplement to Ben's call for a significant top today. Whereas
Ben's analysis was based on a macro view of the markets, my methodology
includes macro models as well as a detailed look at individual stocks in the
OEX and NDX. My forecasting methodology also is predicting a reversal this
week but the macro models of the markets have yet to flash a sell signal.
The most likely reversal days appear to be Wednesday or Thursday.
To get an opinion of the magnitude of the decline, I look at the individual
stocks. The more stocks in an index contributing to the reversal, the
greater it will be. Those of you following Clyde's work on Hurst channels
realize that the chance of a reversal is greatest at the boundaries of the
channel. I measure channel location along with forecast signals to get a
feel for the extent of an index move. Yesterday, 29 of the NDX 100 stocks
were at a channel boundary and near a reversal - today's up move resulted
in 50 of the 100 being in reversal territory.
I expect some rounding action in the next two days with more stocks entering
their time and price limits for a reversal so the decline could be
substantial.
I have also exited fund positions and began to enter on the short side.
I urge caution this week.
Jim White
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