Subj : Market Action
To   : All
From : Paul Rogers
Date : Mon Nov 08 2004 04:47 pm

Content-type: text/plain

I've often made the point that we really don't want to see prices rising
all the time.  This seems to be a perfect example.  Prices were confined
in a narrow range, mostly below the line, all day.  But let's not forget
that 10 (trading) days ago prices were 70pts lower--so this was a narrow
range around the recent, and dare I say it, annual, highs!  Volume
subsided to -11% below average.  This is exactly the sort of action you
want to see if you're in a nascent Bullish trend!

Many "analysts" will say the market is "pausing to digest recent gains."
I prefer to think of it as a realization that traders can be stampeded,
and having gotten somewhere "by accident" or, as better describes the
post-election tear, "on emotion", they need a chance to stop and
evaluate where they now are.  "Do we really want to be here?  Is it OK
here?", are the questions of the day.

Sometimes analysts write about the market as if it were its own unique
being, rather than an emergent property of the actions of a multitude of
traders on a variety of different stocks.  It's often said that "most
stocks tend to follow the market averages."  That's rather putting it
back to front.  What most stocks do is what creates the averages!  While
both outlooks seem to amount to the same thing, one obfuscates the true
nature of the underlying properties.

So the sign of a healthy Bullish market is a pause in the advance
on below average, or at least decreasing, volume.  If prices had
remained flat like this on continued buying, i.e. increasing or higher
than average volume, then by the "Law of Supply & Demand" it would mean
that there were plenty of sellers supplying the demand, and sellers kill
Bull Markets.  If they foresaw prices going higher, they'd be holders.
It's yet another self-fulfilling prophecy.

However, I advise caution.  We're only talking about the action of a
week or two.  As they say, "one swallow does not make a summer."  I'd
just take this as evidence that the Bulls, conspicuously lacking in
evidence this year, have not all been eaten by the Bears.  But they will
not have retaken the field until they get the market into new high
ground, above 1525 or so, with enthusiasm.  The Bears have not all been
gored either.  There are those who say we're in a Bull Trap of a secular
Bear Market.  I'll neither agree nor argue with them.  But neither do I
see evidence of a Bull Market this century.

 Price    Vola-    Momen-   Volume   Oscil-   Summ.
 Change   tility   tum               lator    Index
 -__+     -__+     -__+     -__+     -__+     -__+

 __|_     _|__     __|_     __>_     __|_     ___|     11/02
 __>_     _|__     __|_     __>_     __|_     ___|     11/03
 ___>     __>_     __|_     __>_     ___>     ___>     11/04
 __>_     __>_     __|_     __>_     __>_     ___>     11/05
 _>__     ___>     __|_     _>__     __|_     ___>     11/08

Timing Signals:  I don't use or recommend timing signals, but they're
fun to watch.  If I did though, well, I might use something like this.
(Be warned!!  It tends to whipsaw around signal points!)

Last Signal: BUY        Date:  10/27/04 S&P:    1125
Winner or Loser:  tbd                   By:     tbd

See my market tracking charts for '02-'03 and my investment strategy
study at my website(s):
http://www.xprt.net/~pgrogers/Pers.html
http://www.angelfire.com/or/paulrogers/Pers.html
http://www.geocities.com/paulgrogers/Pers.html



Paul Rogers, paulgrogers@yahoo.com                       -o)
http://www.angelfire.com/or/paulrogers                   /\\
Rogers' Second Law: Everything you do communicates.     _\_V

.... But soft! What light through yonder window breaks?
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