The chop continues.

I didn't want to write up comments yesterday because, after another down day, I was certain you had had enough of my "the bottom is near" talk.  Yesterday the chop continued as a nice reversal put the indices in the black after a steep negative open.  Nothing impressive although volume was better.  Other than oil dropping, nothing new is happening that I haven't already talked about.

Oil did drop over $2.50 a barrel on some rising inventory news and that Bush wants to start looking for oil on some military facilities.  This should help stocks but there is one negative to consider if we get a severe drop in oil prices;  There are several oil companies in the S&P 500.  These stocks will likely fall and take a little away from any rally in the S&P. 

The NYSE 10-day ARMS index finally hit 1.30 the other day.  I had talked about this being the missing link back in late March as I was starting to get back into stocks, yet this indicator was still less than 1.00, normally a sell signal.  The 1.30 reading used to be a very strong buy signal.  This all seemed to change during the bear market as we started to see readings well over (or under, the chart is inversed) 1.50 which some consider the new buy signal.  Still a 1.3 does tell us there is more fear in the market than we had in late March.  A good sign and it did trigger a few temporary bottoms over the last seven months.


                     Charts provided courtesy of www.decisionpoint.com

If the market does follow the 1994 path I showed the other day (see charts near the bottom of this page) we could be seeing that 1.5 soon enough.  The rallies only last 2 to 4 weeks back then before another pullback, even though the low was made.  As I mentioned you can try to play a chop like that but it can be very tough. 

Currently 50% C, 20% S, 30% I fund.  See you tomorrow.

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