Have we seen the market top for 2005? Or are we due for a rally that will see the Dow Industrials top 11,000? We believe that the news this week of General Motor's earnings warning will continue to make financial tsunami waves for the next few quarters. The market has not yet considered the enormity of, or the reason for GM's warning - the economy is running low on financial fuel. The consumer is tapped out, or will be as interest rates rise and those ARM home loans start kicking into a higher gear. Ouch!
And speaking of fuel, at what point will the markets flinch in the face of rising oil prices? How much higher must oil prices climb until the consumer really starts crying the "I gotta start car-poolin' blues". The showdown continues, with oil sneaking up on $60 per barrel. I have worked for both General Motors and Exxon during my career. It's interesting to see the money flow out of GM and into Exxon. But then GM has had something to say about why all of that oil and money flow is necessary. Is the day of the gas guzzler coming to an end? Will GM get the message and get that money flowing back to their corporate coffers with smaller autos? Naaahhhhh! Toyota wins!
Our Trading System - What The Numbers Are Telling Us
An email was sent to subscribers this morning to advise that the market was looking like it might rally a little from this point. Our indicators are still on sell, and have even strengthened the sell signal since last week. The 9x18 Moving Averages have done a bearish cross on our weekly chart of the NDX. The potential rally was muted today by rising oil prices.
All major indices are getting to an oversold level as measured by the Stochastics on a daily basis. NDX is oversold on both the daily and weekly charts. Any bounce here is likely to be limited in both duration and extent. If however, we break through the DOW support at 10,600 in the next few days, then a short-term retracement rally gets pushed out to later in the month.
Our NDX StochRSI has been hanging in oversold territory for the better part of 2 months now. The longer we stay oversold, the more likely we will have some type of rally. If we get another market turn south, I may begin to reduce my exposure in anticipation of a short rally. Hang in there and let's not try to anticipate our indicators!
NDX - Chart Model - Thursday March 17, 2005
What Is The Current Sentiment?
Let's review again a few of our Sentiment Charts to get some indication of where this market is currently positioned.
3 year NDX / INDU Ratio - NASDAQ 100 Leading Lower
The NDX/INDU relative tech ratio. The Nasdaq tech has led us higher over the last three years, but now appears to be rolling over since the first of December 2004.
This is bearish and supports our sell signal.
The VIX is up 25% since late February but this meager rise in the fear index tells us that there is still a lot of complacency in the market. The SPX/VIX is stubbornly high.
6 Yr Ratio SPX / VIX Volatility - Nosebleed Territory
This chart shows the ratio of SPX to VIX (volatility) for six years. This ratio is very near an all-time high and appears to also be forming a topping pattern.
A move of the 8 week EMA below the 80 level of this ratio will lend credibility to an extende sell cycle in the broader market.
Material / Financial Sector Ratio - 3 Yr.
The Materials/Financial sector ratio chart is confirming a materials uptrend. This trend is going parabolic and is signaling inflation is coming or, that the only thing worth owning is safe raw materials.
This trend is good for gold, metals and commodities. Should the stock market tank at some point this year, we may see all commodities gain BIG TIME!
$BKX / INDU Ratio - Weekly - 3 years
Here's a sentiment ratio chart - $BKX / $INDU. The relative strength between the Philadelphia Bank Index and Dow Industrials.
The weekly MACD on this chart and the 20 Day EMA have turned quite bearish after a 3 year up-trend.
Will it bounce from here or will the ratio break previous support line?
Watch this one.
Where Do We Go From Here and How To Listen For the Next Signal?
Listener Summary for the Week
We are close to a tipping point. The daily chart on the INDU does not look good. The bulls had better generate a rally soon or we could see Dow 9000 before we see Dow 11,000. But where are the bulls to find support for their case that the market is undervalued?
The US dollar (Symbol $USD in StockCharts.com) is looking very sad. Again please, tell me, why do foreign central banks want our Treasuries? Is there any hope that the dollar is finding any support in this range? I think not.
The 7 year chart of the US Dollar Index. Where is this all going to end? Why haven't the market reporters been telling us how good it is for the dollar index to go down? Isn't it still good for companies that export goods? Something is broke? And I think it's U.S.!
I am continuing to watch the dollar index. If, or rather, when it drops below 80, we might get some substantial moves in the treasury and stock markets.
And here's the 30-Yr. Bond price chart below (Symbol $USB - 7 years). Not really definitive, but if it does decline in price from here (and interest rates rise) will it be more difficult to pawn our national debt off on the Far-East?
The Market is whispering now, but may be getting ready to shout!
Are you listening?
The Market Listener Indicators
|Week Ending||Slo. Stoch.||StochRSI||MACD||ROC||Signal|
|Thurs Mar 17||Sell||Sell||Sell||Sell||Sell|
|Mar 11, 2005||Sell||Sell||Sell||Sell||Sell|
|Mar 04, 2005||Sell||Sell||Sell||Sell+||Sell|
|Feb 25, 2005||Sell||Sell||Sell||Sell||Sell|
|Feb 18, 2005||Sell||Sell||Sell||Sell||Sell|
|Feb 11, 2005||Sell||Sell||Sell||Sell||Sell|
|Feb 04, 2005||Sell||Cash||Sell||Sell||Cash|
|Jan 28, 2005||Sell||Sell||Sell||Sell||Sell|
|Jan 21, 2005||Sell||Sell||Buy-||Sell||Sell|
|Jan 14, 2005||Sell||Sell||Buy||Sell||Sell|
|Jan 07, 2005||Buy||Sell||Buy||Sell||Sell|
|Dec 31, 2004||Buy||Buy||Buy||Sell||Cash|
|Dec 23, 2004||Buy||Buy||Buy||Buy-||Buy|
|Dec 17, 2004||Buy||Buy||Buy||Buy||Buy|
|Dec 10, 2004||Buy||Buy||Buy||Buy||Buy|
|Dec 03, 2004||Buy||Buy||Buy||Buy||Buy|
|Nov 26, 2004||Buy||Buy||Buy||Buy-||Buy|
|Nov 19, 2004||Buy||Buy||Buy||Buy||Buy|
|Nov 12, 2004||Buy||Buy||Buy||Buy||Buy|
|Nov 05, 2004||Buy||Buy||Buy||Buy||Buy|
|Oct 29, 2004||Buy||Buy||Buy||Buy||Buy|
|Oct 22, 2004||Buy||Buy||Buy||Buy-||Buy|
|Oct 15, 2004||Buy||Buy||Buy||Buy-||Buy|
|Oct 08, 2004||Buy||Buy||Sell+||Buy||Buy|
|Oct 01, 2004||Buy||Buy||Sell+||Buy||Buy|
|Sep 24, 2004||Buy||Buy||Sell+||Buy-||Buy|
|Sep 17, 2004||Buy||Buy||Sell+||Buy||Buy|
|Sep 10, 2004||Buy||Buy||Sell||Buy||Buy|
|Sep 03, 2004||Buy||Buy||Sell||Sell+||Buy|
|Aug 27, 2004||Buy||Buy||Sell||Sell||Buy|
|Aug 20, 2004||Sell||Buy||Sell||Sell+||Cash|
|Aug 13, 2004||Sell||Sell||Sell||Sell||Sell|
|Aug 06, 2004||Sell||Sell||Sell||Sell||Sell|
|Jul 30, 2004||Sell||Buy||Sell||Sell+||Cash|
|Jul 23, 2004||Sell||Sell||Sell||Sell||Sell|
* Note - Our Newsletter is published on Thursday evenings so we make an attempt to "predict" the signal at the end of Friday. You should not base your trading on this or any prediction, but I can trade 10 minutes prior to the close on Fridays (or other days during the week) when I see that one or more of the signal indicators have changed signals. This is particularly important if I am going to a CASH position in order to preserve capital. The above table shows the results of the WEEKLY - FRIDAY SIGNALS with the exception of the latest week, which only shows the END-OF-DAY THURSDAY SIGNAL POSITIONS. The latest signal position may change in next week's newsletter due to a dramatic move on Friday after the Newsletter is issued.
Listen To What He Says
From Isaiah 52:6-10 (KJV): (Think about it on this Palm Sunday Weekend)
Therefore my people shall know my name: therefore they shall know in that day that I am he that doth speak: behold, it is I. How beautiful upon the mountains are the feet of him that bringeth good tidings, that publisheth peace; that bringeth good tidings of good, that publisheth salvation; that saith unto Zion, Thy God reigneth!
Thy watchmen shall lift up the voice; with the voice together shall they sing: for they shall see eye to eye, when the LORD shall bring again Zion. Break forth into joy, sing together, ye waste places of Jerusalem: for the LORD hath comforted his people, he hath redeemed Jerusalem. The LORD hath made bare his holy arm in the eyes of all the nations; and all the ends of the earth shall see the salvation of our God.
I am still working on the Art of Listening, and hope that you are also!
An Educational Newsletter for Stock Market Trend Timers
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