A buy signal was generated yesterday, but not by our indicators.
Historically, the efficacy of our oscillators during this time of year is suspect.
The SOX and Transports may be making a bearish move.
The Dynamic Trading System generated a seasonal buy signal on the NDX at the close of trading yesterday. This signal was generated not by the system's indicators but primarily by seasonal inputs. The system remains out of the SPX market.
Any way you slice it, whether by date or by trading days that are left in the year, the NDX has a high batting average for rising between now and the close of trade on Tuesday. (Note: There are historical data, and there is always the possibility that this year will not generate "normal-ish" behavior.)
The first chart below is the one we look at each day. The NDX continues its test of the lower end of its almost four-week trading range. The indicators are there for you to see, as usual, but please be advised that during this time of year, these indicators have virtually no history of efficacy. Holiday cheer and the magnetic attraction of Santa's sleigh toward the upper reaches of our atmosphere (or perhaps it's toward the North Pole) are historically much stronger than those delivered by our colorful squiggly lines.
The SPX continues to work its way toward the terminus of its rising wedge.
Ultimately, a break below the black line on the second chart below would be likely to bring on a test of the shorter-term demand line (line of rising lows) down near 1400. But seasonal strength is formidable on the SPX as well -- not quite as formidable over the next few days as it is, historically speaking, on the NDX, but still strong enough to prevent the system from generating any sell signals at this time.
Source: The Agile Trader
Source: The Agile Trader
The Philadelphia Semiconductor Sector Index and the Dow Transports are auguring something more sinister. The SOX is currently hovering above the key 470 level. A clean break down below that level would bring our 440 target into play.
This next chart shows the Transports breaking below the November low near 4600.
Source: The Agile Trader
And look at the negative performance on the relative strength line! (This indicator is generated by dividing the price of the Transportation Average by the price of the SPX. When it's rising, the Trannies are outperforming; when it's falling, they're underperforming.) If this index can't quickly make a costume change from bear suit to bull horns and climb convincingly back above 4600, the implications for the broader market are decidedly negative--but very probably not before Wednesday and most likely not until early '07.
P.S. Will you be there when Cramer makes his next move?
Strong brands and companies with vast market exposure can help bolster your portfolio. Jim was able to lock in a 64% gain by buying Ingersoll-Rand at $13 and selling at $22.50. Action Alerts PLUS members were the first to see these moves. Were you among them? Get Free Access Today!
Technical Analysis Odds Favor Titanium Metals' Uptrend 12/21/2006 11:09 AM EST Its recent strength is a good sign. Plus, Valero and Raytheon.
Technical Analysis No More Upside Momentum 12/21/2006 8:33 AM EST Several divergences have resulted in a choppy market this month.
Technical Analysis Not a Bullish Story 12/21/2006 8:06 AM EST The media trumpet the Dow, but the Nasdaq and Transports do not concur.
Adam Oliensis is president of Dog Dreams Unlimited, a guaranteed introducing futures brokerage, and editor of the trading service The Agile Trader. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Oliensis appreciates your feedback; click here to send him an email.
RSS FEEDS
PODCASTS
