Venda do Novo Banco pode representar 8% do M&A na banca europeia este ano

[Pata-Hari]

TUESDAY a.m.
August 26, 2003




Chart Check
by David Nichols

Yesterday was a classic congestion day, with the markets moving sideways after the more severe pullback on Friday. This is highly typical market behavior after a streaky chaotic move, as traders re-group and decide how to place their bets on the next trendy move. We can see on the 60 minute fractal dimension chart that the downtrend was pretty severe -- reaching all the way down to 25 on this indicator -- which is a big clue that the bigger momentum is now downward. In my experience watching this indicator, counter-moves and retracements don't tend to get this far down on the fractal dimension.



So a pause here in the selling which moves the fractal dimension back up towards the high end is entirely expected. That will probably be today's market agenda, on a drifty move up. Yet this will likely be setting up the next streaky move down. And if for some reason, another strong leg down gets started from this current configuration, then that's a big tip-off that the market has some more serious business going on the downside that could really do some damage.

A look at the daily chart of the S&P 500 (I'm using the chart of the futures here, as the data on my SPX chart is a little messed up), shows a lot of "tails" up in a valiant effort to climb above 1000 and stay there. So far, no dice. A pattern of slow erosion is now taking on a more defined shape.



The real driver of this market, in the minds of many astute market observers, is the financial sector. Financials have replaced tech as the dominant force in the market, which is not surprising considering that our economy has become dominated by an explosion in financial services and credit creation, courtesy of an ever-accomodating Federal Reserve.



The financial sector is making a potential classic head-and-shoulders top. I look at these patterns a little differently than most, as I see the "head" as a blow-off parabolic upside move, which then moves into a counter-parabolic move to the downside. According to this structure, there is more downside work to come.

I also like to look at the biotech sector as the main gauge of the market's "hot money". This is where fantasy speculation can really run rampant, as fundamental data points are few and far between, and dreams of blockbuster drugs in the pipeline can carry away investors with reckless abandon.



Right now, biotechs -- and by inference speculation -- is cooling off. The June 6th spike high in this sector was the end of the road, and there really hasn't been much going on in these stocks since then. If we're going to see another blow-off speculative run to the upside for the overall markets, then the biotech sector should simultaneously break strongly above this declining tops line. That will be a great "tell" that the overall markets are going to surge higher, if that's indeed what's going to unfold here.

But of course I have my doubts about that, which stem mainly from the overabundance of bullish complacency. This next chart is the VIX and the SPX overlayed, with the highlighted areas showing what happens when the VIX gets down to these low readings.



The main difference this time is the SPX has managed to stay up pretty well while the VIX meanders in this low range. In the past bear market tops, the SPX started declining while the VIX stayed down in this low range. Lately we have seen this pattern starting to emerge again, which doesn't bode well for the coming seasonally weak period in September and October.

Sentiment Dashboard
by Adam Oliensis



SENTIMENT TANK: Filled by 7% to 11% full of negative sentiment.

SHORT-TERM: Hourly gauge remains in a decline phase that has matured and may be ripe to weaken.

MID-TERM: Peaked and flattened. Actually dropped a point on its raw score so that it's now at 17% on the decline side. This oscillator is derived as a Stochastic, though, so its current status, above 8o and above its trigger line, makes it still-neutral, officially, but ripe to give a bona-fide sell signal. Confidence remains slightly bullish, however with a reading of ONE.

LONG-TERM: Weekly gauge dropped to 10% on the decline side with confidence at a bearish ONE.

BOTTOM LINE: The low confidence levels give the action a muted quality thus far. But this is the window of opportunity for both mid-term and long-term sell signals, though they've not quite materialized yet. If they do not kick in during this ripe phase, and indeed reverse before any significant price deterioration takes place, then we'll get continuation buy signals (which would be bullish).