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I am suffering from an allergy attack, thus, today's article is going to be just short and simply venomous! I would like to comment on some of the reasons that are being offered by many salivating bulls on Bubblevision and elsewhere, about the positive technical characteristics of the market. 1. Once again we are told that the A/D line just made new highs, and that is very bullish for the market. My very good friend and outstanding technician, Mr. Larry Katz, has pointed out that this year the A/D line made new highs right before the market topped out, not once, but twice! The same held true throughout 2001 and 2002. (For more on this visit: http://marketviews.tv/freeservices/archives1/Guests/Katz/pg1.htm) Thus, there may be plenty other legitimate reasons to be bullish about, but the above is not one of them. Whoever is telling you otherwise is lying to you.
2. I have heard ad nauseam about the market's "deep oversold condition" which is supposed to fuel a rally of gigantic proportions. The McClellan ratio adjusted Oscillator didn't even come close to the -75/-100 zone that has always defined "deep oversold condition." Thus, there may be plenty other legitimate reasons to be bullish about, but the above is not one of them. Whoever is telling you otherwise, is lying to you.
3. I have heard ad nauseam about the "positive divergence" between the NYSE Summation Index and price. Yes, that is true, however it is the only one and it is due to the composition of the NYSE; 55% of its components are interest rate related. If you visit http://decisionpoint.com, you can see the A/D and Volume Summation indexes for the Dow, SP500, SP100, Mid-Cap400, and the Russell 2000. They ALL have confirmed the recent lows by making lower lows. See NASDAQ S.I. below. Thus, there may be plenty other legitimate reasons to be bullish about, but the above is not one of them. Whoever is telling you otherwise, is lying to you.
4. I have heard that this rally will have more lasting power because the Volatility Indexes got up to the top of their most recent range, and despite last week's rally they haven't come down a whole lot. Notice that the SPX/VIX ratio is not all that far from the level that the SP was turned down 5 out of the last 5 times! Thus, there may be plenty other legitimate reasons to be bullish about, but the above is not one of them. Whoever is telling you otherwise, is lying to you.
Notice that The Quantifiers are at the zero line, although we do not know whether the current rally will fail or it won't. What we do know is that if it is going to fail, it will do so with the Quantifiers at their current levels (+/-5, points). [The Quantifiers are a composite indicator of MACD, Stochastics, Aroon, ADX, 10 day SIs, 20 day SIs, 50 day SIs, SI25s, 10 day BSEs, 10/20 day TIs, SMIs, TOs, McClellan Oscillators and Summation Indexes. They illustrate the overall technical condition of the markets. Above zero and rising, they indicate an overall strong positive technical background. Below zero and falling, they illustrate a strong negative technical climate which is getting even worse. Below zero but rising, they illustrate a poor technical environment that is improving. Above zero and falling, they illustrate a positive technical environment that is deteriorating.]
Last but not least, over the last 12 months I have received several emails with regard to speaking engagements. I usually do not participate in seminars, etc., due to lack of time. However, on September 18th I will participate in a three-way workshop here in Los Angeles with two other fine technicians, Mr. Tim Ord, and Mr. Fari Hamzei. For more information please visit: http://aegeancapital.com/general/seminar.htm. Ike Iossif
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