Morning Briefing, 11/21/2002

[21st Century Alert]

Title: Morning Briefing, 11/21/2002

Click Here! THURSDAY a.m. November 21, 2002   Strong White Candle During the rally yesterday, the two "sentiment tanks" for the market -- bonds and the VIX -- both dropped sharply. We're now seeing firmly established downward momentum in both, signaling a potentially strong advance for stocks. The big "tell" for this market continues to be bonds. You can't trust a move in this market unless it's confirmed by stocks and bonds. We've got to take advantage of this incredible inverse relationship right now, as it's not always going to be like this. But while it's working, it's invaluable. For insight into the bond market, Bloomberg's bond columnist Caroline Baum is not to be missed. Incredibly, her columns are available free on their web site. It's likely not to be there forever at that price (doesn't make sense!). Her latest piece looks at inflation measurements, and is the usual eye-opener. The OEX had an important move up yesterday, establishing a strong foothold for an assault on higher levels. The immediate target is the previous high at OEX 472, and a push through there gives a clear look at OEX 490. Most importantly, the OEX moved over that red candle at 464, and didn't collapse going into the close. For traders weaned during the great bull market, this has certainly been an uptrend of a different color, with breakouts more often reversing into fakeouts. It's actually been tough for momentum players on both sides. Even the merest whiff of a support or resistance line has been repelling stocks away. But yesterday's white candle is a strong hint that the bullish forces have gained the upper hand, and are gearing up for another run. Lately there has been a momentum-squasher at every turn, but if the cards fall right now, there should be another significant push higher. From my "arm-waving" school of analysis comes a feeling that there are still many that doubt the sustainability of this rally. I monitor lots of sources, and most of them are really excellent market sages. All I can say is Rodney Dangerfield gets more respect than this rally. And I haven't seen a single person that's been bearish during this up move throw in the towel and go long, which is kinda sorta something I've been looking for as a warning sign that the end of the rally is near. But the bears are waiting this one out. If the market moves above OEX 472, then short positions are going to be hard to hold. Again, this is anecdotal, but it's worth a mention, I think. Another point involves the VIX. It's dropping quickly at this point, and is now back down into the high 20s. We have to remember that this is the range the VIX likes to live in during a benign market environment. It's pretty rare historically for the VIX to spend any time over 30, much less spend weeks and months over that level. So a move into the 20s doesn't necessarily signal the end of this uptrend. It could be just the beginning of a new advance phase, actually.   Definitions   This Morning Briefing is brought to you by 21st Century Alert. Your 21st Century Alert subscription offers so much more. Click here to go to 21st Century Alert's Web site. You can find this article on the Web at: http://www.21stcenturyalert.com/page/tcx/morningbriefing/2002-11-21/ To remove yourself from our mailing list, or to get your username and password so that you can access the Morning Briefing archives on our Web site, click here.