Market Update

April 23, 2000

 

HSLP - NYSE

The NYSE Composite Index closed up for the week at 639, 2.2% above it's 200-day moving average (see green line)—that's bullish.

As noted in our April 16 Update:

"The "big (mkt) picture" is that all of the major US market indices are now "testing" their key, long-term 200-day moving averages.

While technically bearish per Friday's close, if they quickly rebound back above their respective 200-day moving averages, the long-term trend will once again be up."

HSLP-NYSE also closed up. Looking at a longer-term chart (not shown), HSLP-NYSE may be forming a large base (since August 25, 1999). A sustained rally above 2440 would complete the base. The target of the completed base would be in the 2524 areasubstantially above the May 13, 1999 record close at 2489—indicating a new record high for the NYSE Composite Index too.



HSLP-Nasdaq

The Nasdaq Composite Index closed at 3644 on Thursday, April 20up 323 points (9.7%) for the week.

The Nasdaq Composite managed to finish the holiday-shortened week marginally (3.5%) above its 200-day moving average (see green line)that's bullishproviding no one sneezes.

Last week we noted:

"The Nasdaq's 5-wk plunge finds it positioned just above it's long-term up-trendline (at 3257 this week) from the October, 1998 bear mkt low."

The Nasdaq Composite opened last Monday just below that up-trendline, but quickly rallied back above it. For present, we must consider that the "test" of that trendline was successfulthat's bullish.

After 2 days of "relief rally" on April 17 & 18, the Nasdaq Composite closed lower on April 19 & 20.

We've been discussing O'Neil's Follow-Through Day (FTD), a handy tool that assists us in confirmating a market bottom. As U may recall, it prevented us from getting prematurely bullish after the April 4 plunge.

Briefly, Day 1 is the first day of a higher close following the low of a decline.

Day 4 through Day 7 are the most desirable days in which to get a confirmation.

Although any FTD up to & including Day 10 is acceptable, if it occurs after Day 10 it's a sign of weaknesss & has a much higher failure rate.

Monday, April 24 is Day 5. Thus a rally of over 1% on increased volume any day this week or next Monday (May 1), would qualify as an FTD, providing there's no decline below the April 17 low of 3227.04.

The DJIA & S&P 500 are in the same position. The DJIA has come the closest, rallying 1.6% on Thursday, but on lower volume. Of course Thursday was a per-holiday session & one would expect lower volume. But rules is rules. And, the DJIA will get more opportunities this week.

Ideally, if we are to get a buy signal via an FTD, it'll occur by Wednesday's close.

A down-day now on increased volume would be a big yellow flag. So watch for that too, in addition to the FTD. Stay flexible.

If 3227 does not turn out to be the bear mkt low, the next support area is just above 2900.

Although the Nasdaq Composite is down 27.8% from its March 10 high, most high-tech stks remain richly-valued with respect to average valuations over the past 10 years.

Even with an FTD buy signal, should that occur, we'd advise treading lightly til we see more stks forming good bases that can support substantial advances. Risk remains HIGH.

That doesn't mean stks won't or can't go up. But U should be aware of the risk involved in participating in the current mkt environment.

Many who "danced with margin" belatedly discovered that recently. Don't U be among the casualities.

It's better to miss a risky advance & wait for a safer moment than to lose your capital & have less of it when the "right" moment does arrive. And it will, it always doesbut it may require the exercise of patience on your part to play the "sit & wait" game so that U are in the best position to take advantage of the best opportunities.

HSLP-Nasdaq has a series of lower highs & lower lows, a clear downtrendthat's bearish.

However, it made a new low on Friday while the Nasdaq Composite did not (at least yet)that's tentatively bullish. HSLP-Nasdaq must turn up to signal a possible turn & before the Nasdaq Composite makes a new low.

U may recall that HSLP-NYSE exhibited the same pattern in late February (see March 5 Update), which pinpointed the low for year thus far.



DJIA (with 39-week moving average)

The DJIA (Dow Jones Industrial Average) closed on April 20 at 10,844up 537 pts for the week.

If U take out a magnifying glass, U'll see that it's above its 39-week moving average (10,818; see green line on chart) by a scant 26 pts (0.2%). That's technically bullishbut with no margin for "error," so don't blink!

Examining the above chart, U'll see that the DJIA is at the same level it was in May, 1999. Not much "progress" over the past year, eh?!


S&P 500 Index

The S&P 500 Index closed the week at 1435, 3.7% above its 200-day moving average (1384; see green line). That's bullish.

The S&P 500 is also above its 50-day moving average (see magenta line).

If the recent low at 1339 doesn't hold, the next potential support level is 1325, then 1233.


Sentiment

Sentiment is bearish.

Investor's Intelligence reported a small decrease in the number of bulls from 56.9% to 54.9% —far too many—exceedingly bearish.

Bullish Consensus bulls decreased 10% to 28%that's bullish.

The American Association of Individual Investors (AAII) bulls "broke out the champagne" popping from 51.9% to 68.7%—a sky-high number that's extremely bearish.

Until the above bullishness subsides, stocks remain vulnerable to lower prices. The above percentages are not what U see at important mkt bottoms.

We've discussed the CBOE (Chicago Board Options Exchange) equity-only put/call volume ratio from time-to-time. Starting this week, we've moving that discussion to this section in our Update issue, as it is best categorized as a sentiment indicator.

Last Update we noted:

"The CBOE equity-only put/call volume ratio hit at a mkt-bottoming .77 on Friday. That followed Wednesday's .50 & Thursday's .57, also mkt-bottoming readings. (Although for medium- & long-term investors, it's safer to wait for a 15- to 21-day moving average of the ratio to turn down before buying.)"

This past week the CBOE equity-only put/call volume ratio numbers were: .66, .55, .50 & .68all mkt-bottoming levels.

However, neither the 15-day, nor the 21-day moving averages turned downso no longer-term buy signal has yet been given.


Monetary Factors

Monetary factors are bullish.

We bought June US T-Bonds on the March 16 close at 95.25.

Our profit-protecting stop-loss at a 1-day close under 97.04 was just nicked on the April 18 close at 97.03 for a gross profit of US$1,312.50/contract.

3 of our 4 longer-term bond models are bullish.

If U are flat (have no position), U can buy Sept US T-Bonds on a 1-day close over 98.08 (98.12-limit). If the close is above the 98.12 limit, then wait for a pullback to the 98.08 or lower level.
Stop-loss: 1-day close under 96.13.


Stock Markets: The Bottom Line

The US stock market is tentatively bullish with all major indexes (DJIA, Nasdaq Composite, NYSE Composite, Russell 2000, S&P 500, Arithmetic Value Line & Wilshire 5000) above their respective 39-week moving averages, except the Geometric Value Line.

However, the DJIA, Nasdaq Composite & Russell 2000 are just barely above their 39-week moving averages. Close monitoring for declines back below this key moving average is highly recommended.

Globally, the following indexes are above their 200-day moving average:

Brazil's Bovespa
Canada's Toronto 300
Finland's Helsinki General
France's CAC 40
Germany's DAX
Hong Kong's Hang Seng (barely)
Italy's MIBtel
Malaysia's KLSE Composite
The Netherland's AEX

Spain's Madrid General
Sweden's Stockholm General
Switzerland's SMI
Taiwan's Taiwan General.

The following indexes are below their 200-day moving average:

Australia's All Ords (barely)
Belgium's BEL 20
Greece's General Share
Japan's Nikkei 225
London's FTSE 100
New Zealand's Cap 40
Norway's Total Share
(barely)
Singapore's Straits Times
South Africa's JSE All Share
Thailand's SET.

Of the 24 stk mkts above, 14 are long-term bullish & 10 are long-term bearish.


Gold

Gold, basis the London PM Fix, closed at 279.85, down 0.55 for the week.

The brown line in the weekly chart below shows a possible support level (275.75-276.10):

If Gold can rally above 283.50, a tentative bottom may be in & would be the first sign that a test of the prevailing down-trendline (see red line from the October 5, 1999 high at 325.50) is underway.

This assumes that the 275.75 level isn't breeched. A sustained decline below 275.75 would complete a large, bearish Descending Triangle pattern (defined by the red & brown lines above) & indicate markedly lower prices ahead.

If the 276.10 level doesn't hold, the next zone of potential support is between 252.80 & 263.10.

Traders & aggressive investors bought on Monday, April 17 at 283.50. Maintain your stop-loss at a 1-day close below 275.75.


New Recommendations

Note: Any recommendation in a previous Update issue that is not repeated in the subsequent Update is automatically cancelled. Any recommendation in HSL is "active" until the next issue of HSL or until specifically cancelled in a web Update.

London:

Berisford Intl (BRFD) at 318-stop (320-limit); stop: 294.

Switzerland:

Clariant (CLN) at 661-SCO; stop: 618.

USA:

Citigroup (NYSE: C) at 63.25-stop (65-limit); stop: 54.50.

Clear Channel Communications (NYSE: CCU) sell short at 59.75-stop (59-limit); buy-stop: 67.

Eni SPA ADR (NYSE: E) sell short at 46-stop (45-limit); buy-stop: 52.

Gilden Activewear (AMEX: GIL) between 36 & 37; stop: 32.

NBTY Inc. (Nasdaq: NBTY) at 16-SCO (16.75-limit); stop: 13.75.

99 Cents Only Stores (NYSE: NDN) between 40 & 41.50; stop: 35.50.

PC Connection (Nasdaq: PCCC) between 35 & 39; stop: 32.50.

Pfizer (NYSE: PFE) at 42.50-SCO (44-limit); stop: 36.

Watson Pharmaceuticals (NYSE: WPI) at 48-SCO (50.50-limit); stop: 43.

Note: IF a Follow-Through Day occurs & depending in which index(es), buy the indicated security on the close or on the next day's open. The securities below are useful for small accounts (good diversification) & to bring your stock allocation percentage up to the recommended 25%, if needed. Once the leaders for the next advance become apparent, those will be the stocks to own, rather than "index" stocks.

DJIA: Buy Diamonds (AMEX: DIA). Stop: 101.

Nasdaq Composite: Buy Nasdaq Tracking Stock (AMEX: QQQ). Stop: 76. (This is the way it is usually referred to. Actual name is: Nasdaq 100 TR Series 1. And it was designed to track the Nasdaq 100 Index, not the Nasdaq Composite. But it works fine for our purposes.)

S&P 500: Buy S&P Depositary Receipts (AMEX: SPY). Stop: 132.


Stop Adjustments

USA:

Howmet Intl (NYSE: HWM): Raise stop-loss to: 19.25.

Medical Advisory Systems (AMEX: DOC): (Shortsale) Lower buy-stop to: 10.75.

R&B Falcon (NYSE: FLC): Raise sell-stop to: 16.50.


Blessed is the man who finds wisdom, the man who gains understanding, for he is more profitable than silver and yields better returns than gold. Proverbs 3:13-14 (NIV).


Happy Easter & Happy Passover to all Hslms

from The HSL Team