The Inger Letter Forecast

Out of fuel and enthusiasm. . . per forecast; the market has been under pressure for some days now overall. We absolutely allowed for a rebound today; and expect with the oscillators getting a bit oversold, that there may be yet another one, which we'll try to catch also. That's particularly if a part of today's (Tuesday's) washout was tied to the newest Russian default, a story that only crossed Dow newswires so late, as to make traders researching it hard-pressed to find reliable info. On top of that, expanding Chinese espionage stories has the consensus still expecting that the U.S. Congress will approve renewal of China's trading status. Some might say they're lucky to have any status, given what procedurally was done to steal the most precious nuclear secrets.

The specter of a trade war with China doesn't sit well with the market; (balance and suggestions of how this may play-out, are reserved for subscribers, along with the potential market impact.)

A further connection is being made by the Street (only now) to something we have said all year, by the way. That was: that computer and PC demand would peak early this year, and for related stocks as well. That was a belief PC sales were pulling from forward demand of the second half of the year (not just in PC's either), and from early 2000, because businesses had to be prepared for Y2K; hyped event or not. In a sense, companies had to address the concerns, and one way to do that (outside of legacy Cobol code used in Mainframes primarily) was to buy new machines, a cost that could be amortized over time, rather than expensed in a single Quarter or two, as would be the case by modifying old code and machines. That meant that last year was a great year for the industry, and that this created a feeling of unending growth that wasn't there, at least for now. (That's exactly why we were bearish on pretty much everything early last July; and bullish in Oct. with a call to be sellers of these stocks into 1999's early rallies, and that did actually work out.)

In telecommunications, we speculated last night, (a reserved portion), and you have uncertainty. On top of that you've got the worry (whether warranted or not) of a Fed rate hike forthcoming. No argument that if things cool enough you won't get the hike; but if that happens there's just no way you'll get the Street's forecast consensus earnings, and that conundrum has been our argument.

In a fundamental situation where there is no bullish alternative, and that is what we have said on more than one occasion in recent weeks (emphasizing that bulls had nothing left to talk about in any remote way optimistically, but "liquidity", which basically meant "game over" but they didn't know that…we did); you are confronted with only limited alternatives. One would be a blow-off of some sort of unbelievable proportion like never seen before, and the other a top. Since the guys mostly calling for blow-offs were either "mechanics", who are usually wrong (or at best have poor "feel" for the market) or bears who'd converted to optimism, we didn't want to join that crowd.

The other approach was to simply tie the facts (some call them fundamentals, but also they will encompass technical, monetary and psychological aspects of the real world) to our pattern call; and whala..the top. Some say that we've contributed an expression developed over the years to be simply termed: "momentum precedes price" to the stock market; or an "Inger" swing-rule. Both came together while I was in Vegas for the InterOp Networking convention, as interestingly we speculated in advance they well might do. There you have it as far as the willingness to play, but not to chase, and the identification of this top. It was our view that while you couldn't confirm it until you broke the low 1320's; that would happen. It was "confirmed" last night; we rallied back to a breakdown point and failed, and now comes as is often the case, actual news after-the-fact to explain to the world was such action "couldn't be expected". (New readers should know that it is our approach to short spikes and then fade stops where used; not short into the hole on such negative confirmations as seen yesterday. One every figures it out; we're looking for rebounds.)

Distribution under the "dome"

There's an old saying in the market; "when in doubt stay out", and doubtless that's what they did Tues., and part of why we called (on the 900.933.GENE hotline) for the S&P's premium to be yanked in late going. The preceding reiteration of most of what we worked hard on during an exciting couple weeks, should be somewhat instructive to newbies (newer investors and traders) who ponder why they might or might not believe permabulls' explanations of the "unforeseeable" changes that of course impacted the market. Not only where they very foreseeable, but markets told you there was a problem building for some weeks (even longer actually). Only a gold-plated optimist (being nice we didn't use the word moron) would expect a linear advance this year in the stock market, after the kind of advance we've had from a "fixed" turn identified last year, and with the advance news that major participants in that Fed-assisted Oct. turn we nailed, insisting they be "made whole" by this year's 3rd Quarter. I do not base my calls on that (though it contributed), and now we face a derivative's crisis sequel on top of the varying fundamental (peaking earnings and margins), technical, monetary and even psychological factors that have been at work. And it all happened under an Inger-swing dome, (with multiple S&P trades long and short on the way).

All of this is occurring on our May timetable, with the market falling of its own weight on illiquidity, rather clearly projected here to occur, once "confirmation of weakness" was determined. Sure, after-the-fact views proliferate; but in our view it was orthodox as many tried fighting the Fed, last week, and even this week. (balance reserved)

The overall result, in this environment during which we've maintained an intermediate (with major trend overtones) short-sale from the 1380 level of theJune S&P, has been fantastic for traders in the Indexes; that concurred with our forecast of course. This worked great for those who stuck with it for these past ten days of course, and even better for those who trade intraday and close positions at each session's end. We disdain distinguishing between macro or hourly/daily trades in the S&P, but sometimes it's necessary; both to distinguish between the overall forecast and an ongoing desire of hotline(900.933.GENE) callers to have some finessing of intervening moves.

Bottom-line: we had a fantastic Tuesday; with something in the order of 4000 points or more for intraday S&P players, while the position players are likely surprised that we're still holding short the June S&P 1380 short-sale made a week ago Thursday from the convention in Las Vegas. That is the "official" trade, and is ahead about 9500 points, working on 10,000, which might equal our best (or close to it) from last Summer, as far as just single trades go.

For the Dow Industrials. . . last night noted we were pressing the 40-day moving average then; and below that 10,480 would be likely support for a day or two. Hard to tell even now on that bit, especially if (balance reserved; as it's forward-looking, but involves structural market rebounds).

On an intermediate basis, there is no bullish alternative that we can ascertain at this time. That was also said last night. For DJ Transports; we broke the 40-day yesterday; which just proved my point that the "confirmation" of the absurdly-inadequate various Dow Theories (because they were intended to forecast economic strength; not the stock market), was a correct interpretation. The confirmation of strength occurred shortly before the top, which is as it should be according to (an Inger?) school of market analysis. Once you get confirmed weakness signals we'll absolutely either be buying on a broader front or be much closer to it, as repeatedly noted in recent weeks. At this point, there's no real support for the DJT; well, just temporary in nature. In the case of theUt's; we correctly explained that along the way, in harmony with the T-Bonds. (Call is reserved, but it's well-known that we called for the long bond to temporarily rally shortly after the FOMC.)

June S&P. . . has been thoroughly covered, except to note that the 200 day moving average is around 1200 just now. And you already know our targets. For the moment, we're on top of short-term support at 1280, (balance reserved). It's fun to have a market that's finally emerging from, not exactly a rangebound pattern, but one that has for a long time (in weeks) failed to resolve, when we all knew (well most of us) how it would go. (Sorry; rebound & purge targets reserved.)

In Summary . . meanwhile, our macro (position-play anticipated from the start) June S&P short-sale from 1380 was maintained continuously for the last ten days or so, and still is. The Tuesday (and Wednesday) intraday action was again excellent, as outlined in tonight's DB comments.

Of course; intraday swingers (trading the market, not the other daytime fun some may indulge in) have done better than these 9500 points, by virtue of consistent daily trading gains in our hotline guideline S&P trades, whether they followed rigid parameters (which we hope they do not, as we mainly strive to give guidelines, structure to our calls, and pattern projections), or not. If not; they may have done even better than our S&P outline calls; and this time appreciably so, but it went swimmingly well either way, whether last Friday, on Monday or on Tuesday, which included one homerun long trade by the way and a sizeable afternoon (grandslam) homerun on the short side. (And on Wednesday at least one homerun long-side trade; on top of smaller base-hit gains.)

The Nasdaq 100 (NDX) and 'net stocks bad hair day Monday, continued the trend from that of last week (thus anyone who missed this, or didn't see it, must have been on another planet). The bigger-cap tech's we've consistently warned were in a tired condition, whether of a PC or Internet variety. And they are generally not buys yet, for other than periodic rebound intraday trades, as we've repeatedly noted, and which we certainly don't attempt to pinpoint. Now they attack those smaller ones that have been holding out or advancing, which suggests a short-term washout is in the building phases now.

The McClellan Oscillator reading on Monday was -72, down from Friday's -14 posting. A move to the vicinity of the "neutral zone" last week was normal, even in a bearish rebound, after which it would then be deflected by the seller's force-field, and thus increasing a risk of heading to the "dark side". That was a comment from Friday, repeated last night also. Tuesday's posting: -101.

Our preliminary forecast for this week pointed in the down-up-down direction as a generality, with the second down having a better chance of a negative acceleration for the market overall. Noting that may be the optimistic alternative for the week, as remarked in a weekend commentary from Newport Beach, we obviously played this right, from a daily and bigger-picture standpoint. For now we're short on our position trade, and flat hourly after a terrific day (and we will not hold multiple overnight trade positions, as one is enough); with the important short from the June S&P 1380 level very alive. We'll certainly address all of this on the a.m. 900.933.GENE hotline, about five minutes into the market. At 8 p.m. EDT; the June S&P on Globex is at 1285.50, up 100 or so from Chicago's regular daytime close. The premium just now is at 130, on a "rally". (Again; much of Wednesday we played to the long side, but caught numerous trades both ways.)