Perspective/Retrospective

(Here's a draft of something I was pulling together on Saturday morning...It never quite jelled. Nevertheless, I'm going to post it as Sleepless left a prescient comment that was as if he had been peering into my computer!)

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My favorite thing to do on Saturday mornings (when I'm not doing a dog transport--and I've today off), is to drink coffee, listen to the technician on Financial Sense OnLine (R.McHugh this week), and nose around a bit.

There's a certain miasma between waking and caffeinating that I find helpful in getting things that have been marinating in my brain to raise their hand and say they are ready to get on a hot grill and sizzle.

To say that I've had a dearth of sizzling of late is an understatement. But I've an efficacious subconscious, and I know that it is working sub radar. It will choose in its own good time and schedule to 'reveal' itself to me. I'm still waiting for a revelation.

MarkM's comment below

Hi L. My model, eh? :)

Just need to watch the internals on any pullback here. Market was WAY overbought on a ST and intermediate term basis so we have the CAPACITY for a nice, big pullback maybe to the 900 level. That gap from last September was finally filled and for a technically driven market that was huge.

Watch what the advance decline line does. Watch the new lows. Etc. Is the pullback orderly or messy? If it gets messy with lots of bad action underneath, then we go to 900ish. If it's orderly, then we can base and pop this into year end and Abby Joseph Cohen gets her day in the sun (1200 on the Spoos).

Watch for basing action around the bottom of the channel. Usual pattern is then a blast above it sending the programs off to the races. That pattern needs to change to have a meaningful decline. Otherwise it's just garden variety profit-taking and re-accumulation for the next leg up. (If little ol' me is seeing this then it's time for the bulls to switch playbooks, perhaps with mid-channel switch or better yet from 5% or so below the channel.That would REALLY cream the shorts.)

Hedgies and program traders have been driving this market and they already have their number for the year so this is a dangerous time.

MarkM

inspired me to pick up my Mamis book...The Nature of Risk. I have about 100 post flags in this book. Naturally, I have some 'special' flags, too, to give a bit of a hierarchy between good and great. And one of the 'great' flags is an indicator that Mamis uses on the New Highs/New Lows. He considers this indicator one of the single best indicators of trouble...in that it signals first with a divergence. And the market, much like my subconscious, will move at its own particular pace to reveal what it has in mind. You, though, need to be mindful of its 'fixin to get ready to...." status.

Here's what Mamis says:

In the preceding chapters, you will have noticed a considerable reliance on the number of new highs or new lows as an example of a useful market-"language" statistic. The reason for this is simple: it works. No other indicator--whether readily available, as this one is every day, or not--has such a consistent success record.

Here is a chart of the New Highs- the New Lows. You are viewing a net difference calculation, and I've chosen to do this for the NYSE.



What is telling in a kick- in-the-stomach sort of way is the velocity and verocity of the March sell off. What is further telling in a rub-your-eyes-this-does-not-make-sense sort of way is that there does not appear to be any weakness in either of those two moving averages.

Here's another chart for the NYSE showing a weekly moving average (10/30/2000 through now) for the Advance- Decline.


Here's the Nasdaq moving averages of the NH-NL against the composite index price.





Conclusion? A Monty Python, "I'm not quite dead yet?"

Waters appear choppy and dangerous, but it is mutual fund year end, no? A push higher? A fall lower? We're as likely as not to see both. We are in the netherworld of "if the market doesn't suit you today, wait for tomorrow" era.