-- Posted Monday, 16 August 2004 | Digg This Article
The sage awakes to light in the night of all creatures. That which the world calls day is the night of ignorance to the wise.
Bhagavad Gita c. BC 400-, Sanskrit Poem Incorporated Into the Mahabharata
We are looking at approximately 80 years worth of data here. The main super up trend line indicates that when we finally start correcting in a hard way, Dow 2000 could be a reality. Currently we are in a very tight channel formation. We exhibited in several past articles that the current Dow bull is nothing but a fake bull when priced in stronger currencies. However even this fake bull can produce some serious profits and so rather than sit and whine that this phase was fake, we have been playing it almost from the moment it began. The top channel has been formed as a result of a huge run up and therefore the long term out look is simple. Channel formations are indicative of explosive action. When they form after periods of extreme correction, the movement is up and when they form after periods of extreme price appreciation, the direction is down. So after this last final rally, we are almost sure that we will enter a slow but sure downward phase. In between we will experience huge bouts of selling, followed by equally strong upward action, but the trend will be locked in a downward phase.
In the next few months we actually think there is a better chance of the markets rallying than plunging. More and more writers are getting bearish and the number of individuals who are either bearish or neutral keeps rising drastically. Take a look at the table below.
| 8/8 | 8/1 | 7/25 | 7/18 | 7/11 | 7/4 | 6/27 |
Bullish | 22% | 25% | 14% | 24% | 19% | 61% | 35% |
Bearish | 51% | 43% | 47% | 52% | 56% | 28% | 45% |
Neutral | 27% | 32% | 39% | 24% | 25% | 11% | 20% |
DJIA Median Guess | 9985 | 10083 | 9979 | 10143 | 10019 | 10400 | 10345 |
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We expect another mini rally, which will be followed by one more huge one day sell off that will most likely occur in September. This sell off will occur on very high volume and the masses and most of the writers out there will be ready to state the world has come to and end. As a contrarian you will know that based on market rules; they have to be wrong. The reason is simple, there is insufficient food out there to feed all the scavengers only the strong will survive; therefore the masses must lose.
The reason there's so much ignorance is that those who have it are so eager to share it.
Frank A. Clark
© 2004 Sol Palha
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A look at the Dow
by Alan Lunt
Contributor, Tactical Investor
DOW JONES INDUSTRIAL AVG- x $5 - CHICAGO BOARD OF TRADE
FUTURES ONLY POSITIONS AS OF 08/03/04 |
--------------------------------------------------------------| NONREPORTABLE
NON-COMMERCIAL | COMMERCIAL | TOTAL | POSITIONS
--------------------------|-----------------|-----------------|-----------------
LONG | SHORT |SPREADS | LONG | SHORT | LONG | SHORT | LONG | SHORT
--------------------------------------------------------------------------------
($5 X DJIA INDEX) OPEN INTEREST: 47,921
COMMITMENTS
6,056 14,148 313 33,324 25,873 39,693 40,334 8,228 7,587
CHANGES FROM 07/27/04 (CHANGE IN OPEN INTEREST: -1,024)
-3,084 2,258 -257 4,833 -1,817 1,492 184 -2,516 -1,208
PERCENT OF OPEN INTEREST FOR EACH CATEGORY OF TRADERS
12.6 29.5 0.7 69.5 54.0 82.8 84.2 17.2 15.8
NUMBER OF TRADERS IN EACH CATEGORY (TOTAL TRADERS: 87)
16 32 5 26 23 42 60
What are the futures market saying for the Dow. In the commercials the shorts have been reduced and the longs increased, the difference for the week is approx 7.5k contracts in favour of the long. So the commercials, who are nearly always correct are backing the long side of the market. It is the little chap who is short 3 to 1. The ratio of long to short in the commercials is 1 to 1.29.
With the put call ratio the 50-day ma has crossed above the 200-day ma and is holding. It is presently at 0.6, a little on the long side of neutral. So the conclusion I come to is that the market will find its bottom and rally from here. Also it is interesting to note that the put/call ratio is winning against the S&P. Something is in the wind.
The other thing to watch for is that options expire Friday week. The leading 4 big houses like clockwork go opposite the P/C ratio come options week. Expect a rally in the short term. A little rule I found was never to short the market over the weekend prior to options expiry week. It gives the lads a chance to jack the market out of Europe over the weekend.
.
© 2004 Alan Lunt
www.tacticalinvestor.com
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-- Posted Monday, 16 August 2004 | Digg This Article
