john magee technical analysis::delphic options research ltd    

The series of ever lower horizontal lines, as well as the broken angled (trend) lines tells its own story. The volume tells a story too. These stories for the moment do not have a happy ending. There is no predicting what the market will do right now, so investors are well advised to continue hedged and traders are advised to maintain a very short term outlook with tighter than normal stops. The market is nervous as a cat (after the dead cat bounce, and Halloween coming up) and if times were not unique (as in 9/11 caused a paradigm shift) the market would be looking to form a bottom pattern here. Given that the land of the brave has turned into the land where Congress heads for the hills at the first whiff of anthrax the best policy is to keep your head down. Considering these circumstances short looks like a better way to be than long. We have written a long term perspective letter which offers some perspective on this moment in the market. See Paid Services.

Holy skamoly. As if all that weren't enough the witching day is coming up. Friday is Halloween for the market. If we were short term traders we'd be shorting right now. Long term traders should be doing what we told them to do for more than a year. Just based on judgement and our secret measuring techniques we think the dead cat bounce has about run its course for the moment. REMEMBER: Think is not observe, and is an opinion, not an analysis.

Short, Sweet and Succinct: The shrinkage of volume on the bounce from the bottom is ominous. Need we point out the implications of this? If it is not clear to the reader he should click on the information on the Golden Gate Seminars. Fair warning.

V bottoms are actually pretty rare and mainly occur in optimistic environments. So we would be more than a little surprised if the bottom shown here held. Typically after a sell off like the terrorist market sell off will be marked by a rapid recovery into which some late bulls thankfully offer their holdings and then prices drift lower till the bargain hunters gag on the bargain. On the other hand (as Jack Kennedy's economists used to say) we suspect this bottom will turn out to be an excellent long term buy for those who bought for the long term (5 years or more). Few traders have that patience so we will probably see bungee markets. Most of the above qualifies as speculation, meaning random verbalizing. As for analysis, trend traders will wait until a bottom is clear. This is because the downtrend which started in May shows no proof whatsoever that it has ended, and trends do tend to continue. Traders should have a field day here, selling strength and buying weakness. Above all it is important to understand that at this juncture NO ONE including ourselves can speak with any certainty about what the markets will do here. Mark and remember those who speak like confident experts here and remember to avoid them in the future.

Long term investing: (from our comments of Jan 01) We see no reason to change these comments this week. Isn't that boring?

Dow: The Dow can expect to find support at 10000 and is buyable, but in small commitments or portions of a portfolio or additions thereto. We expect to see it in a very large see saw from 9-12000 for some time and would hedge at the high end and increase commitments and lift hedges on oversold conditions at the low end. Jan 15: Don't hang up. We change our minds everyday according to the conditions of the moment.

S&P: We have pretty much the same opinion about the S&P with the range being 1200-1500 and would follow the same strategy.

NASDAQ: This thing is on wheels--either that or a Roman candle (not referring to candlestick patterns, but to the fireworks.) Can you buy it? If you're faster than a scalded skunk. At least there is a line of defense about 3700. But it's definitely playing with fire.

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