Fearless Prognosticator: The Market's Going Down ... Unless It Goes Up

OK, the charts aren't too clear. Go check with the fundamentalists.
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It's unavoidable. It's inevitable. It's impossible to resist!

Yes, once again, your faithful technician is forced to look at the market and, combined with my own special "spin," to come to some astute conclusions. (Please note: I take full responsibility for the use of the word "astute." In reality, I'm just hoping it's a self-fulfilling prophecy.)

Astute observation No. 1

: I think interest rates are headed down ... unless, of course, they're headed up. Take a look at the chart below. This is the same darn chart I've been showing for months. And sure enough, interest rates climbed until that long downward trend line was met head on. And then, boom, down they went. So, now you'd have to say the overall downtrend in interest rates is renewed, right?

Yeah, well I think so ... unless rates double back and bang through that trend line on the upside. If that happens, well, uh-oh!

Astute observation No. 2

: The market's heading up ... unless, of course, it goes down. Again, the chart reveals all -- which isn't much. One thing it does show is that potential head-and-shoulders everyone was crowing about. Regular readers will know, though, that I place about as much trust in them as a coin flip. Here was the problem with that formation, even before the action early in the week: I never had any short candidates. I mean, I had zippo on that side coming into that formation, and I still am seeing very few shorts. Stocks are just not breaking down right now, at least not the kind I like to short, and that gives me a signal the up ride is over.

I mean the market should come down, right? It's overpriced and everything, right? So, where exactly, then, are the stocks that are dropping? Beats me.

Astute observation/prayer No. 3

: Lord of trading, please don't let this be another sideways market! Maybe it's me, but this year has not been an easy one. Why? Because since early May or so, what, we've had about two good days to trade? I mean take a look at the advance/decline line below. Sideways market, followed by a few weeks of a downtrend where you could get some shorts in, and now this up/down B.S. again! Enough to drive a man crazy.

Astute observation Final

: I have no idea what the market is doing! My gut says down. The charts say up or inconclusive. Who knows, maybe sideways. I'll tell you, I sure wish I was a fundamentalist!

Reader Requests

But enough about the market. Tired of talking about it anyway. I'd much rather hear from reader

Julian Diaz

who writes:

Gary, I'm thinking about taking advantage of the current explosion in DVD (digital video disk) technology. I decided to invest at the end of last year in two companies that participate in this industry: Sigma Designs (SIGM) and Sonic Solutions (SNIC) . The former has performed very well, but the latter went from 4 to 8 and recently back down to 2. As I write this note, it seems to be crawling toward 3. Would you be so kind to compare the charts of both and give me your opinion?

Now as a sidebar, I'm kind of interested in this DVD stuff myself. On our recent road trip to Pittsburgh, we took along one of our laptops that has DVD capability. Picked up a few DVD movies beforehand, and bingo, a portable movie screen! Believe me, it was a lot more interesting for Diana to watch

My Best Friend's Wedding

than to name all the motels in Breezewood.

Therefore, let's tackle Julian's two requests.

So, Julian, what can I say? I don't like either of these as a long, although if SIGM can rally a bit more, I'd have a crack at that.

This begs the question, though, of what is the right DVD play? Invariably, when the Smith household starts using something -- and I predict we'll soon have quite a few DVDs in the house -- there's a hot stock right around the corner. But I'm just a dumb technician, so readers, fill me in. This could be

the

play of 1999!

Finally, I'll conclude with a quickie "Herb watch." Reader

Martin Melnick

writes:

Herb's pounding on Ancor Communications (ANCR) now. What do you think about it from the TA side?

Martin, who wants to bet against the

Herbinator

? (Much better than Herbivore, I think.) See below.

And folks, that's a wrap. As you read this, I'll be away playing "spouse" to my wife's "executive." Sure hope the spouses' luncheon is fun!

Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes five technical analysis columns for TheStreet.com each week, including Technician's Take, Charted Territory and TSC Technical Forum. While he cannot provide investment advice or recommendations, he welcomes your feedback at

gbsmith@ibm.net.