FSO Technical Discussion Between Tim Wood (Host) and Martin Goldberg (Guest Technician)

I've just fired up the FSO Saturday. Martin Goldberg is the Technical Analyst. I've always liked Martin's work. His writing clear and his analysis thoughtful. Most importantly, he is flexible. He also has a website, and I've included it under "New Stuff".

Jim Puplova is out for the first hour and Tim Wood is filling in. I will paraphrase/quote elements of their conversation. As always, I think that it is worthwhile your listening to these 10 or so minutes. Also, they do a transcript later in the week.

Tim Wood--Dow Theory, non confirmation (transports v. DOW), has a bullish twist. It is not a buy signal, but it warns that the trend might be changing.

(Background given my TW): Jim's oreo theory--tough times ahead, we would get to the creamy filling where things would seem okay, and then more tough times. Jim stated last week that he thought we were getting near the creamy filling. JP is out and TW is taking his place. To Marty: Have we got to the creamy filling?

MG: Since October/November, the S&P had a top, but it made a series of lower highs and lower lows. The bounces have been dramatic, but in all cases have failed. The bounces have been produced on the news that the Fed is going to do something and everything is going to be okay. The bounces have been in smaller in magnitude and shorter duration. This week was different. For certain,the market had a great week, but on less than stellar volume. The market is at a critical juncture. This would be an appropriate place for a failure, but that failure has not begun. Gives examples of charts that failed and have retraced to their neckline: FedEx, Dillards, Tractor Supply, Capital one--have completed reversal patterns and rally to neckline).

S-t benefit of the doubt goes to the bulls. L-t benefit of the doubt
goes to the bears. Skeptical of rally so far due to leadership.
Pretty much been sectors with the lowest quality fundamentals
(financials, retailers, homebuilders). [Peanut gallery note--these are also the most highly shorted sectors, and I always come back to Art Cashin's comment about the shorts in this market being the most weak handed--neither MG nor TW mentions this].Tim Wood concurs--also looking at banking. Nothing has happened to invalidated the current down trend. The Transport non confirmation warns that the trend is trying to change (from down to up), but does not tell you that the primary trend has turned up.

MG: You do not want to be too married to your feelings or technical position. In terms of transports---looking at Federal Express--it has very well defined technical levels. With the recent rally, the stock has moved to the neckline. If the stock breaks above the neckline, then you have rethink your opinion. Re the homebuilders, the homebuilders, they are trading at 2003 and 2004, you have to buy into the premise that they were extremely cheap from 2003/2004. MG doesn't think that the fundamentals or the chart have. TW thinks the creamy filling will last months, not years. MG thinks that it could end very soon--perhaps just a couple of weeks [echoing Cat's sentiment about earnings]. Still have 3 lower highs. If that is decisively broken to the Feb 1 upside, then the benefit of doubt goes to the bulls. The high made this week at 1380 (week)--still a lower high.

Gold--There you have the opposite. A secular bull market with a sharp correction. Gold has not acted well in the last month. The technical pattern look good: Royal Gold and Agnico Eagle. in HUI 420 is an important level. If that is taken out, would need to re-evaluate.MG thinks that the week coming up is really important. Still believes that the trading pattern TW thinks we'll see some weakness from s-t overbought conditions. Hold above the previous low.