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414-351-1992(February, 2002) STOCK INDICES: CRB INDEX--A small dip at the end of December meant that this Index came into January with a friendly three up "but" monthly cycle. With only a handful of days left to go, the Cash Index is struggling to get higher on the month. It is not a bullish profile. However, it does not become truly bearish until they penetrate the last major bottom at 182.83. The rally effort that began in October is on shaky ground, but that will change if they can push a monthly close above 193.
STOCK MARKET--As you may recall, the S&P 500 Index was expected to have a jolt to the downside in the first half of January. It all began on January 7 when the market was three up and on a double top, just a whisker above the 200-day moving average. The minor trend is down and this Index has moved below the ten-week moving average. A larger trend change hangs in the balance as the Cash Index tiptoes just above the last reaction low of 1115. Closing below that level will represent an honest indication of negative change on the weekly chart. When that occurs, the next target will be 1061 which is half way back to the September low. At this point, such a drop will be the worst case scenario, not to mention an obvious buying opportunity. Seasonal proclivities favor an immediate rally, beginning in the last few days of January. Typically, that surge only carries until the middle of February so watch for signs of a top around that time. What if the bull trend erupts again? At this point a new rally high will be an impressive show of strength and we can then forecast a run to the major fifty percent level at 1246. Wait for the permission offered by market performance to effect entry, but keep a friendly attitude.
As this is written, the DJIA is only four days away from a bearish monthly reversal. If that holds true on the last day of January, then we can reasonably assume that the Dow is on the way to a fifty percent correction. That proportional calculation offers a target of 9181. A near-term rally will find a hard spot at the 200-day moving average which is currently at 10,100. Just before that, a gap will be filled at 10,069 and the minor fifty percent resistance comes in at 9990. There is no reason to be impressed unless the market can get through all those numbers.
The NASDAQ Composite Index leaked out to a slightly higher high early in January, but that was immediately rejected and the ensuing correction has already violated the last reaction low, prior to the final high. The trend is down until proven otherwise and a logical expectation is for a test of the fifty percent support at 1743.
Dave Norton
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