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Friday, April 26, 2002  3:01 PM CST

This was an interesting week, so please check back Sunday for the latest update.  My apologies, but the daily charts have NOT been updated as of today's close.  They will be by Sunday, along with the weekly charts and the weekly commentary.  See you then.
 

Thursday, April 25, 2002  3:42 PM CST

OK, now for the THIRD day in a row we got a BUY signal from the STEM.MR model and this one, too, turned out to be short but somewhat profitable.  These morning dips seem to bring out a bit of fear, but that quickly dissipates as soon as we rally.  Overall, I would say that's not a real positive environment - I would rather see more days like today, where there was at least some fear and it persisted throughout the day.  We still have not seen any extremes in any of our indicators, even on an intraday basis.  We keep getting high readings, but no real extremes where you can almost feel the fear and panic out there.  That's what I prefer to see to get more aggressive about the possibility of a trend change, but of course that's what almost everyone else is looking for too.  The market rarely accommodates so many like opinions.

So was today an ugly reversal day?  Hard to tell, and I wouldn't put a whole lot of money behind that theory even though it may turn out to be correct.  Trading (and investing) is an odds game, like blackjack, and you need to reserve your capital until you get those hands where you know the odds are in your favor, then push your chips out.  We did get a small reversal-type day near support levels, with an ever-so-slight bullish sentiment background, so I could certainly see a rally in here.  Also, the VIX hit the 10% upper envelope then reversed, which is a positive sign.  However, I would much prefer to see a wash down to a better support level with a spike in some of our fear gauges.  Today we had the narrowest range of the past four days in the S&P and NDX, so we may get a pickup in volatility over the next few days. Whichever way this thing moves next, it should be fairly decisive.

Wednesday, April 24, 2002  3:40 PM CST

For the second day in a row the STEM.MR model gave a weak BUY signal which quickly returned to neutral after small headway was made in the broad indexes.  Right at the close, the model once again entered BUY territory so we will have to wait until tomorrow's opening 1/2 hour to see if anything comes of it.

A preliminary look at the sentiment surveys shows a mixed-to-bullish picture. The Consensus Inc. survey increased a bit to 29% bulls (from 28%), but that is still in the bottom 15% of all readings over the past 10 years. The Investors Intelligence % bulls decreased a couple of percent to 52.7% (still in the top 25% of all readings over the past 10 years) while the % bears increased to 30.1% (still in the bottom 25% of all readings over the past 10 years), also a couple of percent. Those II numbers have been gyrating around those levels for over three months now. So while the oft-quoted II numbers are quite bearish to me (although getting better), some other surveys show that sentiment isn't as bullish as most would have you believe. I'm still neutral at the moment, but sentiment is heading in the right direction for a sustained rally.

The VIX (but not the VXN) is now approaching the 10% level (above the 10-day moving average) and the RSI is close to 70, both of which suggest that it is getting "overbought".  Nothing to get us to take action yet, but it is beginning to get interesting again.

The breadth oscillators are still hanging in there, which is unusual.  In fact, the number of new lows is actually DECREASING with each mini-selloff we've had over the past month.  That means that there is underlying strength in the market, and when you take out some of the tech heavyweights such as MSFT, the indexes would look much better than they do now (especially the NDX!).  Many of those stocks are coming up to important support points, so the next few days could be pivotal to determine if we stop the slide or keep dripping lower.

Bottom line is that the trend is down, and there is nothing sentiment-wise to prompt us to fight that trend.  Sure, we could turn around tomorrow and begin the next leg higher, but it would be without the support of a positive sentiment environment.

Tuesday, April 23, 2002  3:35 PM CST

A rather unusual day today in that the STEM.MR index actually went down along with the market.  Typically when we see the market move lower like today, that model would be at the upper end of its range, near BUY territory.  But today, the model actually made it down to just over 20 - near SELL territory.  About the only way to intrepret that is that the selling was fairly orderly and there certainly was no fear or panic.  According to common perception, that bodes well for a continued decline.  The breadth oscillators have finally begun to tick down a bit, but we're already resting on support in both the S&P (1100) and the NDX (1320).  About the only indicator I track that showed some pressure today was the VIX (but not the VXN), which is now about 5% above its 10-day moving average.  That's positive, but not actionable.

There is certainly room to rally here, but there is no sentiment catalyst at this point, so I still remain firmly neutral on all time frames.

Monday, April 22, 2002  3:45 PM CST

About the only conviction I expressed in the weekly commentary was that there would be a pickup in volatility this week.  Today proved that true with the big move down in the S&P and Nasdaq, bringing both indexes to within a whisper of important technical support.  Disappointingly, we did not get a corresponding increase in fear.  At this point, I don't really care which way the market goes so long as we get some good movement in our sentiment indicators to give us something of an edge.  Our shortest-term indicators did reach BUY territory late this afternoon, and you should have received the email not long after 2:00 PM CST.  The Nasdaq 100 had a 10-point upside move after that, but I'm not sure I would read too much into that signal at this point - I would like to see much higher readings in our indicators before getting too married to a bullish or bearish opinion (to the extent we get married to an opinion at all).

Our breadth oscillators are finally rolling over from the tops of their ranges where they have been hanging out for quite some time now.  It would be nice to see them reach oversold while the major indexes still hold support.  If they can do that this week, it should set us up for a good play on the long side.  Other than that, I don't see much to get me interested one way or the other.