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Registered User
Joined: 10/7/2004
Posts: 2,126
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The Nasdaq has touched and crossed the 50MA today. Volume was greater than a yr ago when the same thing happened about this time. There has been 3 distribution days in just 3 market days of the new year and 6 in the last 8 market days. Volume has been growing like a storm. MS is dropping even harder than the index. What do you think the implications of this is? Do you think that the 200MA will offer any support. Further more 2004 was a down year for the market for the most part (8 month of retracement after a 12 month rally); since this retracement is happening after a 3 month rally - do you think that it may take the Aug 2004 low? consider that the 200 MA for Nasdaq is still in a down trend started in 2002.
If it does what do you think that the consequences would be ( a lower low ?? ).
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Registered User
Joined: 10/7/2004
Posts: 1
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Ref: Nasdaq, Interesting observations which made me also curious to look back. I see some things different, i.e. 50,200 &500Sma all in uptrend. Starting in 1991 at 407 then peak 2000 at 4500, bubble burst and 2003 low of 1075, then back to 2190 recently and close today 2090. On a log scale the move from 2000 top to 2003 low was just over a 50% fib retracement. If we made the same 50% retracement from the August low to 2190, it would take us to 1960 area.
Starting back in 1991 at 407, if we had experienced straightline growth of 12%/yr, we would be looking for 2240 in 2005. PW opines that this down move could last a bit longer than we might like. With the 200SMA around 1975, maybe that is the target if this turns out to be an extended correction. WFN
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 Gold Customer
Joined: 1/6/2005
Posts: 3
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nice inverted head and shoulders on DIA. Snap a trendline on the Aug, Sept, and Dec lows for the shoulder trendline. We are there right now. Gap fill needed at 100.50?
Check out a ten period tsv on the trannies and smallies or IJR.
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Registered User
Joined: 10/7/2004
Posts: 2,126
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Wfn look at COMPQX on a weekly time frame and zoom 1+. You should see from 1991 to now and chech the 200SMA.
It shoul look down from aprox end of 2002 to now.
thanks for the comments.
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Gold Customer
Joined: 1/16/2005
Posts: 10
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I heard PW's tape tonight. He stressed that the QQQQ had broken the trendline from August as well as the 50-Day MA. He also noted a trend indicator that turned down for on Jan 3-5, and then was trying to recover since, though unsatisfactorily in his opinion. A more sensitive trend indicator was doing better and he thought this showed signs of possible strentgh but was as yet unconvincing.
IMHO the selloff has cleared an overbought condition. The volume has been high this year but, after the first three days, the market has been holding its own as evidenced by the Advance Decline (A/D) line, as well as PW's trend indicators. The condition is similar to that in October where there was a three-day decline followed by 1 1/2 weeks of stabilization. Here too the A/D line held its ground. We know that the October bottom was followed by the strongest rally of the year.
The early Jan selloff also bears a close resemblance to the Jan 1991 early selloff. This also lasted two weeks. It was followed by a two-day retracement of two weeks of losses. The market moved up fast for three more weeks, and labored up further till late April.
While it is dangerous to project replication of prior configurations, I expect a similar strong bounce here barring calamatous international events. I believe most of the entire 2005 gain will occur in the immediate future.
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Gold Customer
Joined: 1/16/2005
Posts: 10
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P.S. I should have added that my discussions of the A/D line and past junctures apply to the Big Board and not to the QQQQ. However, if the senior indices do what I expect, the QQQQ will not be far behind.
At this juncture I am impressed with the long-term charts of most of the tech leaders. While they were weak for most of last year, the weakness was to consolidate the 2003 rise from the basement. The QQQQ is still in the early stages of a retracement of the entire 2000-2002 bear market.
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Gold Customer
Joined: 1/16/2005
Posts: 10
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QUOTE (DW) CURRENT MARKET ACTION: A surprisingly strong day with the major averages all pulling upside breakouts out of a hat. The underlying quality of the action was excellent, with 206 Industry Groups advancing against only 31 declining. Half-point breadth (aka, the "Relevance Index") for the Russell 3000 was an extraordinarily lopsided 787-77. The Leadership Index was 935-280. The SP-500 was an unusually positive 408-80, with the Index itself looking the most bullish of the three, breaking out on distinctly increasing volume. -DW
Who could have foreseen???
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Registered User
Joined: 10/7/2004
Posts: 2,126
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QUOTE (len613) QUOTE (DW) CURRENT MARKET ACTION: A surprisingly strong day with the major averages all pulling upside breakouts out of a hat. The underlying quality of the action was excellent, with 206 Industry Groups advancing against only 31 declining. Half-point breadth (aka, the "Relevance Index") for the Russell 3000 was an extraordinarily lopsided 787-77. The Leadership Index was 935-280. The SP-500 was an unusually positive 408-80, with the Index itself looking the most bullish of the three, breaking out on distinctly increasing volume. -DW Who could have foreseen???
As you can see today there was a second day sell off following that up day, in which volume was not very exciting. I believe it was a gasp for air after almost 2 weeks of strong selling and an opportunity for institutions to add to their positions on discounted prices.
I like to remark that the sell off is not over yet by any chance in the near future. For me the near is a very short term since I am a trader, as for the longer term who can tell.
Thank you for your comments; It is nice to appreciate different inputs.
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Registered User
Joined: 10/17/2004
Posts: 43
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NDX--X is below a declining 50D MA - my personal rule is I'm never long an entity that is below a declining 50D or short an entity above a rising 50D. The trendline was broken 6 days ago. TSV is horrible and MS is poor because this market is declining on strong volume and rising on weak - the definition of a poor market. The 200D MA is in the vicinity of 1475 as is some old resistance which might add to the support. We'll see at least a bounce there if not sooner. There is no CHART support before that - which means nothing of course - we could bounce tomorrow BUT I am short the NDX--X with double leverage and will be until I see a bounce and a test. Leading indicators suggest strongly that last years "rough patch" may have been the start of a light global recession and it is POSSIBLE that the entire late-02 thru late-05 rally was a major bear market rally (look at a chart of the DOW from ཙ-ལ). Also note that sector rotation is strongly into energy & staples with utilities coming on strong - also a symptom of late expansion phase markets.
I don't know if a serious pullback is looming or not. I DO know that 1) the market IS in a correction; 2) if you are long the market, you are trying to time the market, which I never do - I only follow the market; and 3) there are at least some reasonable economic reasons to suspect much greater potential weakness than most people realize is out there.
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Gold Customer
Joined: 1/16/2005
Posts: 10
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I appreciate the conservatism of a trend-following approach. I used both 30 and 60-day exponential moving averages (EMA) which have and average age of data of 14.5 and 29 days respectively. The NDX crossed the 60-day EMA on 1/4 and never looked back. The 30-day EMA dipped below the 60 two days ago.
The NASDAQ is weaker than the NYSE. In the latter, the NYSI Index had several whipsaws wrt the 60-day EMA and was above it as recently as this past Monday the 18th. The 30-day EMA is still above the 60-Day EMA.
I am including all this to relate it to gasminder's results but I am more sanguine about the immediate outlook based on Big Board breadth, up/down volume and price-change behavior.
As I noted last week, the AD line had been relatively buoyant following the first three days of the year. It bounced on the previous Friday and on Monday of this past week. In the last three days it barely got back to where it had been on Thursday the 13th. In other words, breadth is not following the averages down and is still close to its high for the late 2005 advance. Up/down volume is weaker than breadth. But this is in an oversold condition from where rallies often begin. Overall things appear as they did early last August.
All in all the NYSI index is in position for a rally at least back to the December highs and an upward crossing of the 50 day MA. I am inclined to favor DW's speculation about a poositive outcome from the Iraq election pivot point.
This is not trend following but, rather, trend anticipation and is subject to all the risks involved.
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Registered User
Joined: 10/17/2004
Posts: 43
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Well said len613 - and perhaps I should clarify. I am NOT predicting a big drop in the indices, I suspect we are in a minor correction and that DW's speculation is dead-on. IE the market is collectively holding it's breath pending the elections and associated events good-or-bad. I also suspect the economy will do relatively well this year although not up to last year's run and that the market is very likely to end the year higher.
My background is in the earth sciences and there is a traditional concept taught in that field called "multiple-working hypothesis" which in effect means looking at several potential interpretations simultaneously until one shows itself to be stronger. That is exactly my approach to the market. I believe it's important to understand the variety of potential outcomes which are reasonable and be prepared in advance to play them. One advantage is that I can plan a response in advance to various outcomes. A second is that even if not planned, one doesn't "freeze" if a scenario develops that has been considered previously even as a low-probablility outcome.
So to summarize - I think the most likely outcome is a continued correction that bottoms somewhere in the 1450-1480 range for the NDX--X that coincides with a bounce off the support there and the elections next weekend. However I also think that if the correction turns more serious we will likely look back in 6 months and ask ourselves "what did I miss?" and the answers would be the points I raised in the previous post.
Set your loss points carefully.
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Registered User
Joined: 10/7/2004
Posts: 2,126
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I think there is more food for thought in this comments, than when initially posted over 3 months ago.
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