I Will Be Decisive, I Will Be Decisive

By Stephen Cox


NEW YORK --The signal technical event of the year occurred on Wednesday, when the important U.S. stock indexes hit major long-term target resistance.
Traders are likely to know soon whether a bull or a bear market has them by
the tail.
I was gratified that the numbers that have been appearing in this column since
last summer were printed practically simultaneously during the volatile trading.
The Dow Jones Industrial Average tested 9901.37 - 9929.50 target resistance
Wednesday. The Nasdaq Composite poked above 2000.00, at the upper end of the
1982.41 - 2006.63 band. And the S&P 500 just missed 1077.91 by about three
points.

So what do we do now?
That was essentially the question that a reader of this column asked me
Wednesday, after the DJIA had printed a bull market high of 9942.01.
Specifically, he wanted to know what kind of move above 9929.50 would be a
"decisive" breakout.
My typical answer is necessarily vague and probably unsatisfying to most
traders. That's because "decisive" is something of a weasel word meaning
different things to different people. A daily close above 9929.50 would do the
trick for some. Others want to see a succession of such closes, or a specific
percentage move above 9929.50, and so forth. The variants are obviously
innumerable.
My personal approach to the question is based on the concept of the chart bar
as a definitive geometric unit. If the DJIA records a single day's high and low
both above 9929.50, then I'll start to think like a bull. Of course, a single
week's high and low above 9929.50 is going to be more compelling. Since 9929.50
is derived from the monthly chart, a single month's high and low above the
number would clinch a breakout.
This concept has the virtue of giving signals to short- and long-term traders
alike. Its step-by-step approach is conservative, moreover. Finally, and most
important, it's logical; and technical analysis, after all, is an exercise in
logic.
My questioner was obviously bullish on the market. Fair enough. He may end up
making enough money to buy me - cash. A decisive breakout above 9929.50, by
anyone's definition, would probably launch a long-term extension of the bull
market that began last March.
Until that happens, the U.S. stock market is vulnerable to a serious
correction at best. At worst, the correction would morph into an extension of
the bear market than began in 2000.

Euro Making A Routine Pullback

The euro reached up to a bull market high of $1.2155 earlier Thursday. But it
has fallen back to test important technical support at $1.2124. Support may be
the base for a considerably higher move - into the $1.3000 handle in coming
months, perhaps. But traders have to figure on a corrective dip to $1.2009 or to
$1.1948 if support is taken out.
The dollar, now trading near Y108.20, is technically weak for being well below
Y109.65. Its brief dip below Y108.00 confirms weakness, and the prospect of a
test of Y107.46 - Y107.00 target support.

Treasurys Do Nothing - Slowly

The U.S. 10-year note is trading very near 4.371% technical support as of this
writing. The support is roughly in the middle of a long-term technical band
between 4.500% and 4.292%. Forget about a long-term move in the Treasurys market
until that band is broken.
Long-term charts still suggest that the yield will ultimately break out above
4.50%. That prospect becomes less and less probable as time goes by, and
technical momentum sags.

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