Timer Digest Market Commentary

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Fari Hamzei

Well, we got our one day wonder (a bounce) yesterday and this cat showed a lot of life. The November Puts retail traders bought late last week became absolutely worthless, and now, the November Calls they bought yesterday should become worthless by tomorrow as the new reality will sink in when traders ask why FASB Rule 157 (Fair Value Measurements) got delayed for one year TODAY [two business hours before it went effective].

Stay SHORT.

Timer Digest Market Commentary

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Fari Hamzei

THIS WAS SUBMITTED TO TIMER DIGET AFTER THE CLOSE ON FRIDAY, NOVEMBER 9th, 2007.


We have not observed the type of climatic selling one usually sees at the market bottoms. Volume is picking up each day as we discover new lower lows and volatility is increasing.

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My best guess at this juncture is that we need to take out the August lows which correspond to 1370-1380 on SPX Cash Index and 12,500 on DJIA and then reassess the battlefield damage. Along the way, we have November Options X counter-trend move next week and that could create a short-term dead cat bounce. But longer term, the trend remains BEARISH and my outside target remains at about 1300 on SPX Cash Index which roughly corresponds to 12,000 on DJIA.

Timer Digest Market Commentary

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Fari Hamzei

Once you study our Timer and Vol Index Charts, two issues are worth noting:

First our Timer Chart shows (mentioned here last Friday) that we are short-term overbought and due for a pause -- which BLS delivered today with the first negative NFP data in 4 years (and a massive revision to July NFP data).


Secondly, our Vol Indices chart sets the volatility retest targets both in shape and intensity (when overlaid with Sigma Channels).



Given that the seasonality data calls for September being a negative month, dollar being at 15-year low and CFC announcing a 20% layoff after the close today, we hope you have been SHORT this market and getting ready to lower your buy stop.


Just remember: the second mouse gets the cheese !!

Timer Digest Market Commentary

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Fari Hamzei

S&P-500 Cash Index 1480 is our line in the sand. Low volume market advance below this level is only noise to us. What matters most now is that we are extremely overbought on the short-term basis. Next week, a short-term pause is a given. Once the market reopens after the Labor Day Weekend, we shall look for robust market action combined with healthy volume to chart the proper course for our equity markets.

I have attached our updated Timer Chart here for your audience.

Timer Digest Market Commentary

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Fari Hamzei

We have four charts for your review this evening: SPX, RUT, XLF & XLE.

Let us start by stating that market action today, unlike two weeks ago, was not marked by forced liquidation, but rather it was an act of deliberate selling by many players. SP-500 Index (SPX) in the last 30 minutes of trading touched its last week's lows while Russell 2000 Index (RUT) took out its last week's lows in the first hour of trading this morning.



The next major support levels for S&P-500 Index (SPX) are located at 1421 (MS1) and 1387 (MS2). The fact that our coveted CI Indicator crossed its signal line below the ZERO LINE is very ominous. Today SPX also crossed below 200 day and 20 day Moving Averages. Down Volume to Up Volume on NYSE was almost 26 to 1. This tells us that last week the big players bid the market up to get out of their troubled positions and now they are getting ready for a big push down. A top ranked technical analyst on the Street and a contributor to my book, Master Traders, on Monday August 20th, wrote us that his SPX target for the bounce from the August 16 low is 1480. Four trading sessions later, the bounce stopped 60 cents below his target last Friday !!




Another technical analyst for whom I hold tremendous respect for (yes, he works for a bulge bracket investment bank) told us two weeks ago that his SPX downside target is 1300. If you look that how Russell 2000 (RUT) has behaved in August (never crossed its 200 day Moving Average during eight sessions during each of which it had a chance to do so). Because RUT normally leads the SPX, the RUT price action today means, the 1370 retest on SPX is a given, and the 1300 target for SPX is more plausible now than ever. Worth noting is that the next major support for RUT is 745 (MS1) which on the way up last year was a key resistance level.

The next chart really drives it home. Financials are in trouble after MER downgraded them today and when 20% of SPX is in trouble, we all are in trouble. CFC problems are far from over and if our calculations are right, we have not seen the worst of XLF. The next support is its MS1 located at 31.56 which it bounced from on August 16.





Of course the Market won't sell off in a big way till the mightiest fall and that honor goes to Mega Oil. Here we present you with its ETF (XLE) which closed today at 66.88, pretty close to its MS1 at 66.5. Keep an eye on that 10% of SPX, with key support at 64 (MS2) and its 200 day MA at 63. Once these levels are broken, the free fall should begin in earnest.

Have a great Labor Day Weekend.........




Editors' Note: MS1 stands for Monthly Support 1

Timer Digest Commentray

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Fari Hamzei

What a tumultuous week we went thru.

Market Internals and chartpatterns of key indices this past week tell us that Fed's Discount Rate Reduction by 50 bp was immediately viewed as very constructive by our equity markets. While we do not view Thursday SPX low as the final bottom of this leg, DJIA low print on Thursday, for all practical proposes, came in at our first support level (12,500).

We expect this low to be tested as Fed's combat of the SubPrime Mortgage Debacle is still an ongoing event. Ideally this test (and its accompanying vol retest) should come, ceteris paribus, in about 2 to 4 weeks from now. That process will build the tradable bottom which we have been looking for. We plan to go long then and hold it into Xmas.

I have attached our updated Timer Chart.

Timer Digest Commentary

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Fari Hamzei

As you can see from the S&P-500 Cash Index (SPX) chart below, we are about to puncture thru Monthly Support Level One (MS1). On a relative basis, this level became Support in March and early June with much of run-up spent above Monthly Pivot (yellow line). And since mid-July, SPX and other major indices (not shown in this chart) are on left translation mode which is very BEARISH. Once we have a close below 13,000, we expect the redemptions to speed up and market upheaval as measured by vol indices will take over.


Bryon Wein, the legendary Market Strategist, formerly with Morgan Stanley & Co., was interviewed on CNBC yesterday and reiterated his downside target for SPX at 1380 which translates to our 12,000 on Dow (see March Lows).

Keep in mind, about half of what was lost in global market cap during the last four weeks has been pumped in last week by major central banks (Fed, ECB and BoJ). It is obvious now, with XLF in a rout, this is no more than a band-aid and this market will continue to bleed until it can find a tradable bottom -- where is it ?? -- we will find it after we have had our much dreaded vol retest !!

Stay SHORT and Sell the Rallies...............there are no bargains here !!

Timer Digest Commentary

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Fari Hamzei

As we have mentioned in the past, each time that the market has faced a major financial debacle, we have witnessed a ramp-up in major indices' volatilities followed by a Volatility Re-Test, as measured by intensity (sigma levels). This is a must prerequisite for markets before they can resume their normal operations.

This Fed, led by the very able Dr. Ben Bernanke, has pumped in near $85 Bils in 3-day repos this week, buying MBS and Treasuries, in an effort to provide short term liquidity. We are still holding our Short SPX position from June 7th (1490.72). We do not think all the bad news is out yet. This week market actions reminds us of August '98 before the LTCM debacle with same pattern of massive volume on alternating large range days (positive and negative bars).

We have included two charts here. Timer Chart shows a short-term oversold condition with no immediate stabilization in sight as we enter August Options X week. The McClellan Oscillators for Advance/Decline and Up/Down Volume closed in negative territory on Friday even though indices closed mix.





The next chart shows the popular Vol Indices overlaid with sigma channels. This is the set-up part of the vol retest and we suspect the next 3 to 4 weeks will be very challenging trading environment till we go thru the vol retest. Our down-side target on the Dow is 12,500 and then 12,000.



We suspect the next shoe to drop won't be another sub-prime woe, rather it will be an exogenous news and if we had to pick it, it could be Perviz Musharraf getting booted out of Pakistan. That would give this market the badly needed wash out via a massive volatility retest and create for us a tradable low.

Do not buy dips -- rather SELL THE RALLIES..........

SPX at a Critical Conjuncture (Monthly Pivot)

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Fari Hamzei

Notice in the chart below, that for the last 11 months, only during last March, SP500 Cash Index (SPX) traded below its Monthly Pivot Level (Yellow line). Given the price action today -- we hit a number of air pockets (no buyers during upswings and then followed by massive drops on huge volume) -- the US Market, in our opinion, is ready to crack. Make sure your portfolio reflects a defensive posture going forward for the next 4 to 8 weeks.

Timer Digest: We are SHORT SPX from 1490.72

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Fari Hamzei

In the chart below we are using the Weekly SPY (as a proxy for S&P-500 Cash Index).

The run-up in S&P-500 Cash Index came to a halt this week. This prompted us to SHORT SPX for Market Timing purposes. We have informed Timer Digest of our decision this evening.



The next two charts use Daily Bars. The first one shows our Sigma Channel Indicator. Notice how the Zero (0) Sigma line, which gave us an uptrending support line since early April, was broken decisively today. And, we closed at -2 Sigma Level with a massive spike in down volume. As a matter of fact, NYSE up volume was 103 Mil vs its down volume of 1.71 Bil (16.6 to 1).



The last chart is also daily but we have plotted our Monthly Support, Pivot & Resistance Levels Indicator on it. Yesterday Close (1517.38) was a tad above the Monthly Pivot (1514.29). As we projected in our Virtual Trading Room today, the Today's Low broke the Monthly Support One (1) at 1493.03 and closed at 1490.72.

Tomorrow we will discuss additional data points and inputs that were incorporated in our decision to go SHORT SPX. While this sell off may be short-lived, we expect it to be fairly violent.

You may join us at no cost by using our ONE WEEK FREE ACCESS Link located at http://www.HamzeiAnalytics.com/SuperPlatinum_Special.asp

Timer Digest Change of Market Bias: Going Neutral Tonight

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Fari Hamzei

About 6pm PDT today, I informed Jim Schmidt of Timer Digest, by email, that I have elected to change my market timing bias from LONG to NEUTRAL.

We have prepared a video to explain the reasons behind this change. Due to size limitations imposed by our video distributor, Revver.com, it is in eight parts.

Video Part 1


Video Part 2


Video Part 3


Video Part 4


Video Part 5


Video Part 6


Video Part 7


Video Part 8

Timer Digest Commentary -- My 2 Cents

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Fari Hamzei

A very wise woman once told us at a Southern California Technical Analysis meeting: "Trust Your Indicators" (keep that in mind as you read further here).

Well -- Tax Selling started early this week with the FED minutes showing the concerns for future core inflation is on the minds of Board of Gov. of FRB.

I would add this, if the rally we have witnessed from Mid-March was based on a FED rate cut assumption, then with today's release of FED Minutes, further wash out is a given.

Brace yourself and get rid of your least desirable stocks. Keep in mind, the daily and weekly trends are still up.


Editors' Note: This was filed with Timer Digest on April 11th, half an hour before the cash market closed.

Timer Digest Commentary

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Fari Hamzei

Yesterday we saw U.S. stocks close sharply higher as a drop in oil prices calmed worries about inflation and news of an unexpected rise in home sales raised hopes that the housing market is stabilizing. Unquestionably, the rumors of the impending freedom for British Royal Marines held captive in Iran since March 23rd, fueled the strong bid across BigCaps, TechLand and Small Caps. And as George W spoke in the Rose Garden, bashing the Dems, our favorite Defense stocks BA, NOC and RTN, provided us an early warning of the explosive move.

Good Friday has historically provided an up bias for the market; however next week, we expect some selling as we all need to meet our obligations to Uncle Sam by April 15th.

Timer Digest Commentary

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Fari Hamzei

1410 on SPX is our next support.

Since we have not seen the much needed volatility retest (see my February 28th post http://www.hamzeianalytics.net/2007/02/volatility-my-two-cents.html), the current hostage crisis with Iran (British Royal Marines arrested during a routine patrol and taken to Tehran), coupled with Crude Oil Futures at six-month highs and the SubPrime Contagion, should be the impetus for this all crucial retest.



I suspect, unless Iran Nuclear Issue with the UN and this hostage crisis with the UK are resolved quickly, we will visit March lows (1364) and shake the trees till we get rid of the weak longs.

Market Timing

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Fari Hamzei

The pause that we talked about in our earlier reprots is in process now. To add positions, one should wait till the McClellan Oscillators are below the -100 area.

Then move in with select tech names.......we like the semiconductor sector here (QCOM, BRCM and MRVL having been mentioned here before, come to mind).

Video Part 1


Video Part 2


Video Part 3


Video Part 4


Video Part 5

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Read more about why Market Timing matters in BusinessWeek, February 19 issue, pp 80-81: http://www.HamzeiAnalytics.com/docs/BW_TD.pdf

Market Timing

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Fari Hamzei
February 14, 2007

"first [two] one-hundred-point day[s] for DJIA in 2007" is not the issue.

what matters is where the SPX, DJ Trans, NDX and RUT Indices are trading at.

for a healthy market we need to see active participation by risk takers as evidenced by Russell 2000 (RUT) and see a healthy DJ Transportation Index (Trans is a fwd discounter of Economy as a whole) in ADDITION to SPX and NDX

Video Part 1



RUT weekly has put in an outside bar reversal this week and hit an all time high today but we did notice a big seller near the close and DJ Transportation Index closed at all time high today

Video Part 2


bottom line -- the pause we talked about last week has come and gone -- thanks to Uncle Ben

STAY LONG

Cheers and Happy Valentine's Day!

Market Timing

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Fari Hamzei
February 9, 2007

Well......the PAUSE we talked about on Wednesday is here today........McClellan Oscillators foretold this move.......with both SPX and NDX putting in outside bar reversals today, we expect additional weakness next week (Feb Options X) till McClellan Oscillators get in to the oversold territory, maybe by Wednesday.

Video Part 1


Video Part 2

Market Timing

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Fari Hamzei
February 7, 2007

Techs continue to improve...thanks to CSCO and AKAM........Defense stocks are on a tear......thanks to $700B proposed DoD budget....we like NOC, RTN, BA and LMT here;


Video Part 1


Video Part 2


Video Part 3


But our Timer Chart says we are in for a small pause here. McClellan Oscillators don't lie !!

Video Part 4