Daily Market Newsletter

By: Robert McHugh | Fri, May 25, 2007
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Thursday, May 24, 2007

SUMMARY OF INDEX DAILY CLOSINGS FOR THURSDAY MAY 24th, 2007

Date DJIA Transports S&P NASDAQ
COMPQ
NASDAQ
100
Russell
2000
30 Yr Treas
Bonds
May18 13556.53 5213.71 1522.75 2558.45 1896.93 823.66 109^30
May21 13542.88 5202.94 1525.10 2578.79 1911.16 833.65 110^03
May22 13539.95 5197.19 1524.12 2588.02 1916.45 839.92 109^19
May23 13525.65 5199.73 1522.28 2577.05 1904.41 836.54 109^08
May24 13441.13 5135.95 1507.51 2537.92 1874.60 823.80 109^09

 

Status of Demand Power/Supply Pressure Key Trend-finder Indicator

Index Term * Signal First
Date of Signal
Current
Demand Pr.
Current
Supply Pr.
Fullest Extent of
Index Move Since Signal
S&P 500/DJIA Short Exit Long 5/24/2007 392 396 SPX No Position
NDX Short No Position 5/15/2007 399 406 No Position
 
* We consider a new entry point for a signal the day when one measure crosses more than 10 points above the other. We like to exit when (or before if conservative) the two measures return to an intersection.


Summary of McHugh's Proprietary Index Key Trend-finder Buy/Sell Signals
New Signals Tonight
  Index Term Signal Date Current Signal Fullest Extent of
Index Move Since Signal
Purchasing Power Indicator DJIA/S&P Short Buy March 20th, 2007 DJIA Rose 1,336 Points (10.9 %)
DJIA 14 Day Stochastic DJIA Short Sell May 24th, 2007 New Signal
DJIA 30 Day Stochastic DJIA Short Buy April 3rd, 2007 DJIA Rose 1,114 Points (8.9 %)
DJIA Primary Trend Indicator DJIA Long Buy October 31st, 2003 DJIA Rose 3,823 Points (39.0 %)
Secondary Trend Indicator DJIA/S&P Interm Neutral February 8th, 2007 DJIA Up 803 Points
NDX 14 Day Stochastic NASDAQ 100 Short Sell May 24th, 2007 New Signal
NDX Purchase Power Indic NASDAQ 100 Short Sell May 24th, 2007 New Signal
RUT Purchase Power Indic RUT Short Sell May 24th, 2007 New Signal
HUI 30 Day Stochastic HUI Short Sell April 24th, 2007 HUI Fell 30 Points (8.6 %)
HUI Purchasing Power Indic HUI Short Sell May 10th, 2007 HUI Fell 14 Points (4.2 %)

 

As Bill Murray would say, "Something is different. Anything that's different is good." Or at least we can all agree, more interesting.

The Dow Industrials gave up 84.52 points, closing at 13,441.13. Should this correction be about over, it means our current phi mate turn date could be a bottom. We will lean upon our DP/SP indicator for the best indication a tradable top is in. It did give us a warning today. NYSE volume was 113 percent of its 10 day average, with downside volume leading at 82 percent, declining issues at 81 percent, and with S&P 500 downside points leading at 92 percent. S&P 500 Demand Power fell 8 points to 392, with Supply Pressure rising 12 points to 396, telling us a wall of supply hit markets today, more than buyers chose to absorb. These indicators generated a new "exit long positions" signal Thursday. That is not the same as an enter short signal, which would require the Supply Pressure measure to rise more than 10 points above Demand Power.

NYSE New 52 week Highs fell to 115, with New Lows rising to 41, which is a lot at these lofty price levels. We continue to remind bears that New Lows is important to watch, as any major top should be accompanied by both New Highs and New Lows coming in around 75 or higher. The McClellan Oscillator worsened to negative -166.68. The Summation Index fell to positive + 2,942.

The percent of DJIA stocks above their 30 day moving average fell to a still overbought 80.00 from 90.00. The percent above 10 day fell to 46.67 from 76.67. The percent above 5 day fell to 20.00 from 53.33.

Cycles: We have another phi mate turn date period from yesterday, May 23rd, through Friday, May 25th, +/- a few days. Whether a top or bottom is hard to call while happening. It could've been the closing top on Friday, May 18th, a few days early, or it could be the bottom of this small correction since then, should prices bottom around here. Holidays, and ends of month, usually see prices rise.

 

SUMMARY PAST WEEK'S DEMAND POWER/SUPPLY PRESSURE STATISTICS

Blue Chips S&P 500/DJIA
Date Demand
Power
Supply
Pressure
Purchasing
Power Indicator
Secondary
Trend Indicator
May 17 Down 9 to 402 Down 2 to 387 Flat 0 at 137 Down 4 to + 6
May 18 Up 1 to 403 Down 4 to 383 Up 2 to 139 Up 8 to + 14
May 21 Up 1 to 404 Down 2 to 381 Flat 0 at 139 Up 2 to + 16
May 22 Down 1 to 403 Up 1 to 382 Flat 0 at 139 Flat 0 at + 16
May 23 Down 3 to 400 Up 2 to 384 Flat 0 at 139 Down 4 to + 12
May 24 Down 8 to 392 Up 12 to 396 Down 4 to 135 Down 9 to + 3



NASDAQ 100
Date Demand
Power
Supply
Pressure
Purchasing
Power Indicator
PPT Risk Indicator
(Above +18% Means High
Risk of a Short-covering Rally)
May 17 Down 2 to 401 Up 2 to 404 Down 1 to 147 + 4.24
May 18 Up 2 to 403 Down 2 to 402 Up 2 to 149 + 5.83
May 21 Up 2 to 405 Down 3 to 399 Up 2 to 151 + 8.17
May 22 Flat 0 at 405 Flat 0 at 399 Up 1 to 152 + 9.40
May 23 Down 2 to 403 Flat 0 at 399 Down 1 to 151 + 9.30
May 24 Down 4 to 399 Up 7 to 406 Down 8 to 143 + 8.42



10 Day Average Short-term Advance/Decline Signals
Index May 24th
A/D Indicator
Signal Date of Signal Fullest Extent of
Index Move Since Signal
NYSE/S&P 500 - 80.8 Buy May 3rd, 2007 SPX Rose 20.3 Points (1.4 %)
NASDAQ 100 + 3.9 Sell May 10th, 2007 NDX Fell 8.2 Points (0.4 %)
Russell 2000 - 16.8 Sell Apr 27th, 2007 RUT Fell 22.0 Points (2.7 %)

Our three Blue Chip key trend-finder indicators (other than the Demand Power/Supply Pressure Indicator) moved to a "sideways" signal Thursday. The DJIA 30 day Stochastic Fast came in at 80.00, below the Slow at 87.33, but not decisively below, remaining on a "buy" signal from April 3rd. The Fast would have to drop more than 10 points below the Slow for a new "sell." The DJIA 14 day Stochastic Fast fell sharply to 56.67, below the Slow at 79.44, triggering a new "sell" signal. The S&P 500 Purchasing Power Indicator fell 4 points to 134.74, remaining on its "buy" from March 20th. It would need to drop below 133.80 for a new "sell." When these indicators are at odds with one another, this is a "sideways" signal, suggesting either a trend change is coming, or a protracted sideways move is likely. The stochastic indicators measure breadth momentum, and the PPI measures supply/demand momentum.

Our other Blue Chip indicator, the NYSE 10 day average Advance/Decline Line Indicator came in at negative -80.8, remaining on its "buy" signal from May 3rd, needing to fall under negative -120.0 for a new "sell."

The Plunge Protection Team Intervention Risk Indicator came in at positive + 8.42 percent, below the positive + 20.00 threshold that would suggest a short-covering rally would likely lead to a multi-week rally. Within the range of minus -16.00 to positive +20.00, we sometimes see declines, so we are in the territory where a decline can occur. Readings outside the extremes of this range often lead to rallies. The DJIA Call/Put Ratio came in at 1.03, remaining on a "buy" signal from April 18th (moving below 1.00 and above 1.40 is neutral, while rising decisively above 1.00 (above 1.10) triggers a new "buy"). The Secondary Trend Indicator fell 9 points to positive + 3, remaining in neutral territory. A rise above + 30 would trigger an intermediate term "buy." A drop below negative -30.00 would trigger an intermediate term "sell."

The NASDAQ 100 fell 29.81 points to close at 1,874.60. Volume was113 percent of its 10 day average, with downside volume leading at 82 percent, declining issues at 81 percent, and with downside points at 92 percent. NDX Demand Power fell 4 points to 399, with Supply Pressure rising 7 to 406, telling us supply hit the market hard today, more than could be absorbed by willing buyers. We remain on the sidelines at this time. Should the Demand Power measure rise 10 points above the Supply Pressure measure, we will get an entry signal to go long again. Should Supply Pressure rise more than 10 points above Demand Power, we would get an "enter short positions" signal. Our key trend-finder indicators generated a new "sell" signal Thursday. The NDX 14 day Stochastic Fast fell to 37.00, below the Slow at 52.20, triggering a new "sell" signal. The NDX Purchasing Power Indicator fell 8 points to 143.52, triggering a new "sell" signal. The NDX 10 day average Advance/Decline Line Indicator rose to positive +3.9, remaining on a "sell" signal from May 10th, needing to rise above positive + 5.0 for a new "buy."

The Russell 2000 fell 12.74 points, closing at 823.80. Volume was 106 percent of its 10 day average, with downside volume leading at 82 percent, and declining issues leading at 84 percent. The RUT Purchasing Power Indicator fell 7 points to 113.89, generating a new "sell" signal. The RUT 10 day average Advance/Decline Line Indicator rose to negative -16.8 , remaining on a "sell" signal from April 27th, needing to rise above positive + 80.00 for a new "buy."

The HUI Amex Gold Bugs Index fell 10.67 points, to close at 318.74. Volume was 114 percent of its 10 day average, with all issues declining. Our key trend-finder indicators remain on a "sell" signal Thursday. The HUI 30 day Stochastic Fast came in at 5.26, below the Slow at 9.94, remaining on a "sell" signal from April 24th. The Fast must cross more than 20 points above the Slow for a new "buy." The HUI Purchasing Power Indicator fell 4 points to 155.88, remaining on a "sell" signal from May 10th, needing to rise above + 163.88 for a new "buy." Gold closed down at 653.0. Silver closed down at 12.85, and Oil closed down at 64.34. The Dollar rose 0.12 to 82.42. Bonds were unchanged at 109^09, and the VIX was up 0.84 to 14.08.

Australia's SPASX200 fell 76.00 points, or 1.20 percent Thursday, May 24th, with several signal
changes. For expanded coverage, click on the Weekend button.

Bottom Line: Major trend reversals are expected, by mid-2007, if not sooner. Down in equities,
and up in precious metals. Also later in 2007, Bonds should rally hard.

Charts are updated on the next page for six indices.

"And do not judge and you will not be judged; and do not
condemn, and you will not be condemned; pardon, and you will
be pardoned. Give, and it will be given to you; good measure,
pressed down, shaken together, running over,
they will pour unto your lap.
For by your standard of measure it will be measured to you in return.

Luke 6:37, 38

For a FREE 30 Day Trial Subscription, go to www.technicalindicatorindex.com and click on the button at the upper right of the Home Page MCHUGH'S DAILY MARKET BRIEFING Thursday May 24th, 2007

 

Key Economic Statistics
Date VIX U.S. $ Euro CRB Gold Silver Crude Oil 1 Week Avg.
M-3
05/11/07 12.95 82.11 135.27 311.13 670.6 13.21 62.37 Hidden
05/18/07 12.76 82.17 135.09 313.17 661.0 12.93 64.94 Hidden
05/24/07 14.08 82.42 134.40 309.44 653.0 12.85 64.34 Hidden
 
Note: VIX and Dollar are up; Inflation assets are down.

 

Conservative Balanced Portfolio Transactions Thursday May 24th, 2007

* We purchased a $10,000 par Treasury Note, coupon 4.625%, Maturing October 31st, 2011, at a price of
100:03, yielding 4.60%, on Wednesday, April 18th, 2007.

* We purchased a $10,000 par Treasury Note, coupon 4.75%, Maturing January 31st, 2012, at a price of 100:20, yielding 4.60%, on Wednesday, April 18th, 2007.

* We purchased a $10,000 par Treasury Note, coupon 4.25%, Maturing August 15th, 2012, at a price of 97.16,
yielding 4.65%, on Wednesday, April 18th, 2007.

* We purchased a $100,000 par Treasury Bill, no coupon, Maturing July 5th, 2007, at a price of 98.94, yielding
4.97%, on Wednesday, April 18th, 2007.

We posted an updated Balances/Market Value Portfolio as of April 30th, 2007, available in the Guest Articles
section.

If you are enjoying your subscription, please tell a friend. Let them know about our free — one time — 30 day trial subscription.

Here are the symbols for Exchange Traded Funds for the Major Indices:

DIA Dow Industrials   IYT Trannies
SPY S&P 500   GDX HUI Amex Gold Bugs*
QQQQ NASDAQ 100   GLD Gold
IWM Russell 2000   SLV Silver
EWA Australia      

* Note: The GDX actually tracks the GDM, a grouping of 45 mining stocks, but the GDX has very high correlation to the HUI so we mention that as a suitable ETF for the HUI.

 


 

Robert McHugh

Author: Robert McHugh

Robert D. McHugh, Jr. Ph.D.
Main Line Investors, Inc.

Robert McHugh

Robert McHugh Ph.D. is President and CEO of Main Line Investors, Inc., a registered investment advisor in the Commonwealth of Pennsylvania, and can be reached at www.technicalindicatorindex.com. The statements, opinions and analyses presented in this newsletter are provided as a general information and education service only. Opinions, estimates and probabilities expressed herein constitute the judgment of the author as of the date indicated and are subject to change without notice. Nothing contained in this newsletter is intended to be, nor shall it be construed as, investment advice, nor is it to be relied upon in making any investment or other decision. Prior to making any investment decision, you are advised to consult with your broker, investment advisor or other appropriate tax or financial professional to determine the suitability of any investment. Neither Main Line Investors, Inc. nor Robert D. McHugh, Jr., Ph.D. Editor shall be responsible or have any liability for investment decisions based upon, or the results obtained from, the information provided.

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