Empresas do Estado cortam mais de 5 mil milhões à dívida

[Eagle Eye]

MONDAY a.m.
February 24, 2003



One Day at a Time
by David Nichols

Friday was an interesting day, as far as options expirations go. Typically expirations are relatively dull, but Friday was the exception.

The big story on Friday was the VIX, which put up a big red candle on the daily chart. This is significant, as it shows that the downward momentum is really getting rolling now off the recent spike over 40.

One thing I like to do is overlay the timing models I use for prices on the VIX. Doing this on the daily chart, Friday's big red candle triggered a continuation buy signal for the overall market. Often this gives an early "heads-up" for what's coming for the market, making it dangerous to ignore these signals when they come.



I'm getting the feeling, anecdotally, that many are underestimating the potential of this rally off the Feb 13th bottom. Until fear actually shows up again, you can't assume the market is just moments away from heading decisively lower.

In similar circumstances throughout the bear market, the VIX has been able to work itself down into the mid to low 20s. A move down on the VIX of that magnitude would correspond with a pretty good uptrend in stocks, likely all the way to SPX 920, or even to the "neckline" at SPX 950 - 965.

Another point to make is that even the lamest bear market rallies can get back up to the 10-week exponential moving average, which is the green line on the chart below. The stronger rallies move up to the 40-week exponential moving average, which is the pink line.



With the 10-week average just under 863, there is still a decent amount of room left for this rally to extend, even if it's ultimately going to be a weak rally that flames out early. If this 10-week average is recaptured, and holds, then the 40-week average is up around 920.

It won't take much more selling in the bond market to confirm this shift of sentiment back to favoring the stock market. Although bonds have not triggered a sell signal, if this happens it could bring money pouring back into stocks. We have to remember that bonds are extended to the upside here, and this giant pool of liquidity could fuel a good run in stocks if a genuine re-allocation trend gets underway.

Really, this is one of those dicey, uncertain moments for stocks. In the short-term, the rally should be able to extend to SPX 863, and perhaps higher to SPX 870-875. If it flops there, and sentiment swings back to rising fear, then we could have a nasty nine-month cycle bottom sometime in March.

Yet these cycle bottoms are notoriously difficult to pinpoint, and really arrive plus or minus a month or more. So if the markets can extend to the upside here -- much to the surprise of everyone given the world backdrop -- then we'll likely look back and say that Feb 13th was a cycle bottom.

What I'm really trying to say is we need to keep an open mind here, and let the market and sentiment tell us what's happening. We can't let our own particular interpretations of world events, or our hunches about how the Iraqi situation is going to play out, color our market perspective.

I'm sorry to have to now invoke that hoary athletic cliché, heard in countless sports interviews, but at this moment we actually do need to be looking at the market "one day at a time".

Sentiment Dashboard
by Adam Oliensis



SENTIMENT TANK: The tank drained 3% to 77% full of negative sentiment on Friday. That looks like a topping formation so far on the tank's level, but it's early and a negative news shock could reverse the top. (A top on the tank correlates to a bottom in the market.)

SHORT-TERM: The weak decline phase that developed on the hourly gauge on Thursday had no legs. An advance phase kicked in on Friday. If indeed the market is in the process of pricing OUT some of the geopolitical risk then there's some room to run on this advance phase.

MID-TERM: The mid-term gauge progressed from 6 to 8% in its new advance phase. It's still fragile but is developing some strength with a Confidence Diffusion Index (CDI) reading of 3 out of a possible 7.

LONG-TERM: The weekly gauge backed up from 49 to 47% in its decline phase on Friday. However it is still pointing down a WEEKLY basis, having progressed from 42 to 47% between weekly closes. (This can be confusing. The point is that it REGRESSED on a DAILY BASIS but PROGRESSED on a WEEKLY basis. It's a weekly gauge so we have to take its weekly reading most seriously. That's why it remains in a decline phase.) The weekly CDI has REVERSED and is now at a BULLISH (green) ONE. The CDI is thus far trying to lead the weekly gauge around the corner to turn back up into an advance phase. Should that happen, that will confirm the buy signal that is now developing on the mid-term gauge.