Sunday, July 23, 2006

Weekend Commentary from

Newsletter, Members Click Here The break to new lows in the semiconductor index could spill to the tech averages (NASDAQ and NASDAQ 100) as the week's lows were tested in the latter indices. The semiconductor index closed 0.88 shy of its point-n-figure target, suggesting targets of 1,840 and 1,300 for the NASDAQ and NASDAQ 100 may not be as far fetched as initially appeared. To add insult to injury, both averages gapped down from the open and this could be the bearish trigger to initiate a new leg in the decline (a gap up on Monday would create 'bullish island reversals'). The declines in the tech averages put a halt to the bullish divergences in the MACD histograms, but not the MACD trigger lines - yet! Technicals continue to weaken although the rate of distribution (as measured by the trend in on-balance-volume) may be slowing. Higher volume on Friday as the result of options expiration will have muddied the distribution question.

Large caps [Dow and S&P] put up the best fight but were unable to stem losses. The Dow lost the most with its confirmed break below the 200-day MA (This moving average was lost in the S&P some time ago). Bullish divergences in MACD histograms and trigger lines for both indices hold for now. Large caps play to form as points of safety from the tech slaughter. For buyers of support the Russell 2000 is the index of choice. The small cap index closed right on support of 671. There are bullish divergences in the MACD histograms, +DI and CCI indicators, but any loss on Monday would negate this play in a hurry.

Market internals [$NASI, $NAA50 and $BPCOMPQ] continued their slide. The $BPCOMPQ lost the most and lies only 1.32 points away from the most common bounce area a of 35. A loss of 30 would confirm a return of the secular bear, lowering upside resistance from 70 to 50. It now looks likely the $NASI will reach -1,000 before the tech indices bottom as this is the only market internal not to reach typical oversold levels.

Newsletter stock update:

ITKG hit its stop after the reversal of the July 18th breakout. The play closed for a 17% loss. AMED rolled into its stop on the 8th day of a new downtrend. Net support comes in around $32. The June 19th Subscriber pick closed for an 8% loss. CSH hit its stop on intraday action (it finished the day stronger). The July 11th Subscriber pick closed flat. EPAX hit its stop after thin trading crashed the stop price. The June 27th Subscriber pick closed for an 11% loss. FRC confirmed a quadruple top with its higher volume close below $42. Look for a test of the 200-day MA at $39.47. The June 8th Subscriber pick closed for a 4% loss. TEN sliced through its 200-day MA and into its stop price. The long standing December 16th Subscriber play closed for a 12% gain, the more recent February 1st play closed for a 7% loss. XOMA hit its stop after the July 13th Subscriber play failed to break resistance. The play closed for a 10% loss.