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REALITY
CHECK UPDATE
Published Every Tuesday
and Friday |
| ARCHIVE:
APRIL
2000-MAY
2001 |
|
Contributed by
Mitch Harris
President: Market
Trend Realities,
Editor: The Reality Check
Newsletter |
|
August 17, 2001 |
| STOCKS |
| REALITY RATIO: +0.323
|
Last Signal: 06/29/01, TRADING BUY
Dow: 10,499.72 OTC: 2159.60
The Reality Ratio line turned
down just enough to trigger a sell alert warning last week, as investors
haven't seemed satisfied with any news in recent weeks, whether related
to earnings, the economy, or even the weather for that matter. The
reality of protracted economic and corporate weakness is finally sinking
in. Still, when subtracting the affect of the weak technology sectors,
the underpinnings remain constructive, and this is a major factor in
holding some of our key ratio components at healthy levels. If this
remains the case, while other components turn back up, we still think
higher prices can follow.
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FRIDAY, August 17, 2001: What a tough market to come back
to after a fantastic vacation! The last few weeks haven't been kind to
the bulls, as no news has been taken as good news. Since the low reached
at 10,120 was reached on July 11, the markets have been moving sideways
in a relatively narrow range, between 10,200 and 10,600. We think this
trading range will soon be resolved, and with many trading indicators
becoming oversold, we still hold out for an upturn.
So far, the support near 10,200 has managed to hold for a second time in
the last week or so, as the level has attracted some buyers. While this
may not remain the case forever, we think it is buying the market time
while waiting for a positive news event that takes investors by
surprise. The relatively light volume would easily be overcome when
buyers decide to show up.
Most impressive to us is that even in the face of declining market
averages since the 5/22, 11,350 price peak, the A/D Line has remained
very bullish, and is at its highest level of the year and since last
November. Our 10 Day A/D Line indicator has been bullish for the past 15
trading days, telling us that more individual stocks are going up than
down, even as the averages have declined. This is by far our main reason
for optimism in the face of much despair.
An initial push above the last Dow high at 10,478 would be a short term
positive that should lead to another test of the resistance at 10,600.
Above this key short term level, higher resistance remains near at
10,800, 11,000, 11,180, and then at the more significant intermediate
term barrier of 11,350. Support remains near 10,200 and then at the key
7/11, 10,120 low. A close below this would most likely usher in a cascade of stop loss selling.
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TREASURIES
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| Treasury yields continued to remain firm in our absence,
making modest progress below the 5.50% level. This has done nothing to
change our longer term view that the rally is running its course and has
now reached our projected Fibonnacci resistance at the 5.48% retracement
level. Much of the recent strength has been due to the Dollar's recent
plunge, as foreigners have actually been repatriating shorter dated
Treasury issues, which in an interesting twist has provided support for
the long end of the market. Next lower resistance remains near the 5.40%
level, with the next Fib resistance at 5.363% (.786 retracement level).
A push above the 8/6, 5.617% high would confirm a short term bearish
reversal. A break above the 7/6, 5.771% high would confirm a more
substantial bearish trend reversal and indicate to us that the larger
degree wave (3) bear market was underway. Higher support is at the 5.975-6.025% level and would be the next upside target for the bears. |
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GOLD
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Gold & the XAU have enjoyed modest buying ahead of today's
double expiration of options and futures, primarily due to the sharp
selloff of the US Dollar, as the declining dollar makes it cheaper and
more appealing to buy gold. On top of the buying, it has forced some
short covering by hedge funds and other heavily short institutional
accounts. Yesterdays push to 57 on the XAU managed to turn our short
term P&F chart bullish, but it has NOT changed our longer term chart
which remains bearish. We interpret this to mean that while prices may
make a littler more progress, the downside potential has not dissipated.
Perhaps this will begin as the dollar has become very deeply oversold
and while it remains very bearish, it is overdue for a corrective
bounce.
So far, the XAU managed to hold up above 52, with support remaining at
the 7/2, 51.30 low. We still think this can ultimately be resolved with
a decline below 51, which would warn of a deeper correction toward lower
support levels. These start at the key 2/14, 45.64 low, and then at the
even more critical 7/14/00, 41.61 low. Prices have still not quite
cleared the resistance around the 57 level, giving a downturn from near
current levels the potential for a failure. If prices can clear this,
next resistance is at the 6/14, 60.39 high, and then at the 5/18, 66.54
high. For (cash) gold itself, resistance at $276 is being tested now,
with more at $280 and $286. Support begins at $270, which would be a
High Pole at the Bearish Resistance (HPBr) on our short term P&F Chart.
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PORTFOLIO CHANGES |
Friday,
August 17, 2001: NONE TODAY
[Part of our offensive is to have a good defense! That means limiting losses and protecting gains]! |
Article contributed by Mitch Harris: President, Market Trend Realities & Editor,
The Reality Check Newsletter, and reprinted here with permission.
Market Trend Realities (MTR) is a Registered Investment Advisory which manages personal, corporate, Trust, and retirement accounts on a fee only basis. Several low cost, flexible management fee arrangements are available. Investment Advisor, Mitch Harris has studied the Point & Figure Charting Method under the direct supervision of Michael Burke, Editor of the prestigious Investors Intelligence research organization. Management is based on a unique combination of technical analysis methods and tools which include, The Point & Figure charting method, Elliott Wave Analysis & techniques, industry group analysis, cycle analysis, Relative Strength Analysis, Stochastics, and investor sentiment studies. MTR offers a very uniquely structured managed mutual fund program using the RYDEX family of mutual funds, which offer outperformance potential whether equity markets are rising OR falling! Inquiries are welcome by calling us at
(513) 421-8737,
Fax: (513) 421-8733 , or by email at: mtr@fuse.net .
MTR also publishes a monthly investment newsletter called "Reality Check", which offers technical commentary on the stock & bond markets, the Dollar Index, gold & gold stocks (XAU), Treasury yields, utilities, investor sentiment, and Federal Reserve policy. It also offers stock trading recommendations each month with price targets, stop loss points and insider activity. There are 4 trading portfolios, including a short selling account (we are very proud that our short sale recommendations have averaged 12.5% "compounded" during the roaring bull market of the last 5 years). Short term market commentaries are updated on Tuesday and Friday mornings, along with portfolio changes on this web page. They are also emailed for free to anyone who provides us with their email address. The regular subscription rate is $200 (US) per year. Samples are available upon request. MTR will be happy to send information on any of the above mentioned services. Please email us your home or business address along with your daytime phone number and specify your interest(s). |
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