THE WEEKLY RE-LAY
"Stock Market Cycles Still Converging November 24th-28th!"
Beginning 11/18/00 Weekly Re-Lay ...
STOCK INDICES: 11/18/00 Intermediate (2-4 Week) Outlook--Stock indices are adhering to the first part of the scenario described in the 11/04/00 Weekly Re-Lay:
"The way different support levels align, the SPZ could drop back to 1384-1388 into 11/10 and spike down to 1348.00 on 11/13-15 and still be in a position to rally back above 1445.00 into early December. If this takes place, it will probably mean new lows in the NASDAQ 100, a .618-.786 retracement in the SPZ and a 50% retracement in the DJIA into 11/15."
They also fulfilled the following analysis from the 11/11/00 Weekly Re-Lay--much of which should influence these markets into November 24th-28th:
"The NDZ has already seen new lows, the SPZ has retraced .618, but could drop to its 2nd degree golden ratio support at 1352.60 while the DJIA has 50% retracement support at 10,330.5--precisely in line with the coming week's 21 low MARC support at 10,335.5 and the monthly raw SPS at 10,300.7.
Either the DJIA drops to around 10,300 and the NDZ test its intra-year support and downside objective at 2671-2776. Though a rebound is likely in the coming days, intermediate traders should keep in perspective the longer-term (2-3+ month) outlook described in the November 2000 INSIIDE Track.
The SPZ attacked its resistance level at 1455.20 as well as hitting its weekly 21 low AMAC at 1453.00/SPZ and abruptly turned lower. This is a powerful negative signal for the next 2-4 weeks.
This is reinforced by an outside-week/2 close reversal sell signal in both the SPZ and NDZ, which should keep pressure on prices for the next 1-3 weeks. All 3 indices have also closed below their 11/01 lows. This is not positive for the intermediate outlook."
The way things continue to look, these markets should decline into November 24th (possibly as late as the 28th) and then rebound into December.
Short-Term (1-5 Day) Outlook--The SPZ spiked down to support and rebounded into 11/15 in line with analysis from 11/11/00. As stated then: "if stock indices can rally in the next few days it should be viewed as a selling opportunity--likely to culminate with a low during cycles on 11/24-28."
The SPZ could bottom as early as 11/22 (perhaps spiking sharply lower on that day and then retesting the lows on 11/24) while the DJIA and NDZ have their strongest daily cycles aligning on 11/24. This could be saying that the election debacle will find some form of acceptable resolution on/by 11/24.
The NDZ has support at 2621-2661, the SPZ at 1324.80-1335.00 and the DJIA at 10,275-10,335. If these levels are tested and hold through 11/28, it will increase the chances for a new--and substantial--rally. Also, the DJIA has prevented a daily trend reversal to down and could be the leader on the way back up. If it avoids closing below 10,369--and can close above 10,838--it will show that a new rally is commencing.
INTEREST RATES: 11/18/00 Intermediate (2-4 Week) Outlook--Bonds remain in a weekly uptrend, targeting an intermediate high by January, 2001. Considering the action of the past week--and the combination of both the weekly and intra-month trends turning back up, December bonds should not give a daily close below 99-17 if they are to head to new highs in the coming weeks. This means that the potential for a drop back to support at 97-26 to 98-05/USZ is beginning to dwindle.
If bonds can avoid closing below 100-05 (11/01 high), it will reinforce this scenario. A close back above 100-23/USZ will project a rally to monthly resistance at 101-21/USZ. Bonds continue to struggle at what has been identified as their initial upside objective for several months (around 100-26). In addition, they just tested and held their weekly LHR, which indicates 1 of 2 things. Either they just set a peak and should now decline and gravitate towards a weekly HLS before a new rally can take hold, or, more likely, they have not yet hit their highs, but should within the next 1-3 weeks. This--along with other cycles--is indicating a high could come early.
If this is the case, the target for a final rally is 102-01 (where both rallies since 9/21 will be equal in magnitude)--102-08 (the intermediate LLH, derived from the 97-16 low of 9/21/00 and the 92-24 low of 5/19/00). The bottom line is that if bonds extend this rally now--before providing a technically constructive second pullback--they will be in a far more bearish position later. A sharp decline could begin after minor and some intermediate cycles align on 11/30/00.
This also fits with my comments last week that: "...since bonds first dropped to the upper end of support (98-06/USZ) and then rallied to resistance, it sets up the potential for a larger decline if bonds now break through support on the second test. What this would be saying is that the current correction--instead of correcting only the move from May through October and from 92-24 up to 101-11--is actually correcting the entire rally from January and from 89-00/US. If this is the case, bonds could drop as low as 94-12 to 94-24 as part of this decline."
Short-Term (1-5 Day) Outlook--Though it has been postponed a couple weeks, last week's analysis remains intact:
"All of these patterns are signs of a market giving one last attempt to rally before capitulating to a more powerful round of selling there is a strong argument that bonds could be preparing to give a more convincing decline than originally anticipated."
Bonds gave a daily 2CR lower on 11/17, but hit and held their daily HLS at the same time. As a result, they could dip lower into 11/22, but should reverse higher by mid-week at the latest. 99-16 to 20/USZ is good near-term support that should hold.
CURRENCIES: 11/18/00 Intermediate (2-4 Week) Outlook--The Dollar Index has retraced .618 of its initial decline and could test the 2nd degree golden ratio retracement (.786) at 117.86/DXZ in the coming days. "2" and/or "b" waves typically retrace a large portion of "1" or "a" waves so this is not an anomaly.
The fact remains that the dollar has adhered very closely to the intermediate/long-term analysis all year that has called for continued strength until late October. It is interesting that these cycles pinpointed--months in advance--the very time when the U.S. would begin to lose credibility in the eyes of the world. The longer that the Florida Feud goes on, the worse the long-term ramifications will be. [Watch 11/22-24/00!]
Just think of what happens the next time a global crisis arises and the U.S. attempts to take the lead in addressing it or does not take the lead. The first thing from antagonists will be questioning the authenticity of the President. Don't get me wrong. This has been inevitable during this momentous time of change, but it is intriguing what could end up being one of the causes. If it drags out much longer, there is also the threat of foreign investors beginning to look elsewhere until the U.S. gets its (White) House in order.
There are bound to be other factors that pressure the dollar and buoy the Euro. I am not saying the elections will be the cause or even a major factor at least not right now. For now, I am waiting for the third--and typically most dynamic--wave to be triggered in the coming weeks. The next important cycles align between December 15th-21st.
Short-Term (1-5 Day) Outlook--The daily trends reversed to up in the dollar and down in the Euro. This is not unusual for a "2" or "b" wave, but a conflicting reversal in the other direction should be seen before the end of this month. The yen's daily trend is up with two neutral signals. It needs a daily close below 92.11/JYZ to reverse to down. Conversely, a failure to accomplish this--and a close back above 92.89/JYZ--will signal that the yen has completed its retracement and is prepared for a stronger rally into December.
The daily 21 MAC did turn lower in the dollar and higher in the Euro though the dollar did close above it. The Euro's low channel is at 84.80/ECZ on 11/20, so a reversal higher is needed immediately. Otherwise, the new daily trends could spur a retest of the October dollar highs and Euro lows. Look for near-term Euro support at 84.64 and 83.67/ECZ.
INFLATION MARKETS: 11/18/00 Gold/Silver--Intermediate (2-4 Week) Outlook--As conveyed last week: "Gold set its low three weeks ago in line with expectations for a strong rally from late October into February 2001. The two ensuing weeks have been inside of the final week's (of the decline) range, similar to how gold traded in August 1999. Though I am not projecting a replica of the September/October 1999 surge in gold, I am watching to see if the similarities continue. If so, gold should see another week of narrow trading and then begin to move higher. This fits with current expectations for the dollar to begin a second decline after mid-month."
This is still the case and the action in gold remains similar to that in August/September 1999 when the market traded for 3 consecutive weeks within the range of the week that preceded them. This does not mean that a massive rally will take hold the next 3 weeks (as it did in 1999), but it is worth watching.
Silver remains in a weekly downtrend and has edged lower. A weekly close above 479.5/SIZ is needed to neutralize this. It just tested its monthly raw SPS at the middle of the month. It closed the week below 472.3/SIZ, putting the focus on next week--the 60th week of this decline. We are also approaching the 2-year anniversary of silver's last important low.
Short-Term (1-5 Day) Outlook--Gold and silver remain in daily downtrends. The unusual thing is that gold has never closed outside its 11/01 range, setting up a breakout as being more important. It needs a daily close above 267.8 or below 264.6/GCZ to trigger an intra-month signal.
January Soybeans--Soybeans triggered traders to take profits on recent shorts with gains of about $300-$350/contract. They followed this by reversing their daily trend to up on 11/17. If they can close the coming week above 489.0/SF, they will also reverse their weekly trend to up and confirm that a "3" wave higher is in the making. Until that takes place, assume congestion between 475-495.0/SF.
January Crude--As cited mid-week (11/15/00), January crude has attacked and held its weekly LHR for the second consecutive week. This is very intriguing considering the weekly cycles on November 20th-22nd that have been discussed the last couple months.
It is also of interest since crude is just now testing its monthly resistance at 34.80-35.45/CLF. It could spike as high as its new weekly resistance and contract high at 35.94-36.10/CLF. However, it will only take a spike above 35.15 to fulfill cyclic expectations for a top. Given the daily 2CR higher on 11/17, crude could wait until mid-week to peak.
If crude reverses lower by early December, it could be the onset of a substantial 2-4 month correction with initial support at 29.80-30.25 and more important support at 26.80-27.20.
...End 11/18/00 Weekly Re-Lay
November 18, 2000 Eric S. Hadik, Editor INSIIDE Track Trading P.O. Box 2252, Naperville, Illinois 630-585-9218