trendmagic
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Current Market Outlook 07/24/2006: Also free on our website
Dow Jones Proprietary Indicator: LONG
We have been saying from the June 14th bottom that the DOW Jones was in the process of putting a major bottom in, a bottom of intermediate term degree. It may last anywhere from 4 to 6 weeks. Continue to prepare for violent whipsaw type of action. We are in the middle of earnings season and the middle eastern crisis, all in the midst of a seasonally weak period. The swings could be large.
Lets lay the facts out there:
1. On a more intermediate term basis, the DOW has made 4 successful tests of the 10700 area which served as the high end of a 6 month trading range that the DOW was trading within over the last 6 months of 2005. Once heavy resistance areas are broken, they act as support.
2. Our proprietary indicator double bottomed. This has only occured 5 times since 1982. Incidentally, each occurance provided at least a 10% rally.
3. We are seeing all time highs in the cash flow into Rydex bear funds. This is a mega contrarian indicator and has called the last 3 major bottoms in the DOW JONES since 2003
4. Put buying has gone to extreme levels according to the CBOE put/call ratio. This is in support of the bearish sentiment we are seeing as pointed out in #3.
5. I will keep stressing this....FEAR is at extremely high levels. It is in areas where signficant rallies occur, not only intermediate term, but even Long Term bottoms. According to the AAII investor intelligence figures from decisionpoint.com, we are seeing a historic extremes of bears. Now, this is typical in bear markets and we do think we have entered into a mild, however, it can lead to sharp rallies. In this case, we would account those to short covering.
6. There are positive divergences in RSI readings on many of the major index averages with lower volume pushing down on this low versus the June lows.
While we are stating the positives, this is for the next couple of weeks only. We still expect the market to plunge lower into the October timeframe where we should see a more substantial bottom. A bottom that will ignite the impulsive bull market waiting to be unleashed. We have shown you this chart before, but it is worth noting and keeping in the back of your head. We are currently in the timeframe for a 4 year cycle bottom and an 8 year cycle bottom. To understand the implications of this and see what happened in 1998, 1990, 1982, etc. All major bottoms. Therefore, we may see some carnage into that seasonally weak timeframe.
Dow Jones Proprietary Indicator: LONG
We have been saying from the June 14th bottom that the DOW Jones was in the process of putting a major bottom in, a bottom of intermediate term degree. It may last anywhere from 4 to 6 weeks. Continue to prepare for violent whipsaw type of action. We are in the middle of earnings season and the middle eastern crisis, all in the midst of a seasonally weak period. The swings could be large.
Lets lay the facts out there:
1. On a more intermediate term basis, the DOW has made 4 successful tests of the 10700 area which served as the high end of a 6 month trading range that the DOW was trading within over the last 6 months of 2005. Once heavy resistance areas are broken, they act as support.
2. Our proprietary indicator double bottomed. This has only occured 5 times since 1982. Incidentally, each occurance provided at least a 10% rally.
3. We are seeing all time highs in the cash flow into Rydex bear funds. This is a mega contrarian indicator and has called the last 3 major bottoms in the DOW JONES since 2003
4. Put buying has gone to extreme levels according to the CBOE put/call ratio. This is in support of the bearish sentiment we are seeing as pointed out in #3.
5. I will keep stressing this....FEAR is at extremely high levels. It is in areas where signficant rallies occur, not only intermediate term, but even Long Term bottoms. According to the AAII investor intelligence figures from decisionpoint.com, we are seeing a historic extremes of bears. Now, this is typical in bear markets and we do think we have entered into a mild, however, it can lead to sharp rallies. In this case, we would account those to short covering.
6. There are positive divergences in RSI readings on many of the major index averages with lower volume pushing down on this low versus the June lows.
While we are stating the positives, this is for the next couple of weeks only. We still expect the market to plunge lower into the October timeframe where we should see a more substantial bottom. A bottom that will ignite the impulsive bull market waiting to be unleashed. We have shown you this chart before, but it is worth noting and keeping in the back of your head. We are currently in the timeframe for a 4 year cycle bottom and an 8 year cycle bottom. To understand the implications of this and see what happened in 1998, 1990, 1982, etc. All major bottoms. Therefore, we may see some carnage into that seasonally weak timeframe.