Tuesday, November 18, 2008

Numbers Say No Reason to Get Excited

IBD did not say today was a follow-through and it makes a lot of sense. We are still in an area where a big-volume move of over 2-4% would put the rally into a confirmed rally. That may indeed happen, but I am not holding my breath. Today was much weaker than it looked based on my numbers and that is disappointing.

The numbers I got in my scans were pretty disappointing for a day where supposedly the market followed-through. There were 257 upside breakouts today over 4% but there were also 608 downside breakouts over 4%. That (more breakdowns that breakouts) is not the ratio you want to see on a supposedly bullish day. There were also only 11 stocks in my price/volume scan, which tells me there aren't any new stocks popping up in nice bases. We seem to have the same group of stocks holding up that I have been pointing out and highlighting in my videos for the past few weeks, but without new stocks coming into that group, I don't know how much higher we move. We need more leaders, and from a variety of sectors, if we are to have a productive rally.

All that being said, we are pretty oversold based on my numbers so that is good for the bulls. The VIX also reversed off the same trendline I have posted several times in the past week. Perhaps that is a good sign.

Chart from Telechart2007, Courtesy of Worden Brothers, Inc.

Unfortunately, that is about it for the bulls to hang their hats on. Oversold can also certainly remain oversold, especially in this market. My game plan is to look at the resistance and support levels I mentioned in the first post today and go from there. I don't know if we will break through these recent lows soon, but each rally/bounce we have had around these lows have gotten progressively smaller and shorter. That likely means the bulls are growing weaker and weaker trying to defend this 8000/850 area on the Dow and S&P. One of these days, their defense will be so weak (and today it almost was) that thing may break wide open and if that happense, a big move lower is very possible. This market simply doesn't have any buyers, plain and simple.

As always, we'll see what tomorrow brings. I am starting to think we may break to new lows soon. Since my gut hasn't been that accurate recently, you may want to do the opposite of what I say, however. Good luck Wednesday.


Anonymous said...

Sounds like your gut feeling is "right on" to me. Today was a pathetic rally with around two thirds stocks declining, but we'll take it. I think we will test the Oct.10,2002 low of 7286 on the DOW. JMHO, Janet

Mac said...

We'll see how my feeling turns out but I do think this market is setting up for a major move either way. I just don't know how many weaker and weaker bounces we can have before the bulls give up completely. The low 7000's on the Dow might be in the future like you said.