Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 7/27/2010 12:11 PM
On Monday the S&P 500 posted its fifth gain in six days with a rally of 1.1%.  Breadth was positive by 13:2 while the up/down volume ratio was positive by a bit less than 9:1.  However, total volume declined for the second day in a row, falling to its lowest level in two weeks.  The daily Coppock Curve still has a bullish bias for 23 S&P industry groups.

Although we have been highlighting the potential for a worthwhile – even surprising – summer rally, we have had a certain degree of skepticism toward the rally that has been under way since the July 1 low.  As near term indicators approached overbought readings, we felt that it was prudent to await a pullback on the premise that a short term low would likely have bullish intermediate implications in line with a bottoming weekly Coppock Curve.  However, despite those overbought conditions, the rally continued and has carried many of those same short term indicators even higher to confirming, good overbought, levels.  At the same time, it appears that the...
By Walter Murphy on 7/26/2010 7:42 AM
In recent comments we have suggested that a rally through 1099 would open the door for further strength toward 1131-1140.  Therefore, it is worth noting that Friday’s rally carried through that benchmark and reached as high as 1103-1104. Moreover, that rally was enough to suggest that the S&P is now in a second upleg – a probable “C” wave – from the July 1 low.  So that door has clearly been opened for still higher July highs.

The 1131-1140 range represents both chart resistance (the June 21 high) and Fibonacci resistance (a 61.8% retracement of the entire April-July decline).  However, we now also have to pay attention to a new lower degree “C” wave from the July 20 low as it relates to the prior July 1- July 13 “A” wave.  With that in mind, “C” will be 61.8% of “A” at 1112; equality is 1145.  An hourly chart with this count can be found here.

However, at the same time, short term momentum...
By Walter Murphy on 7/23/2010 2:45 PM
On Thursday the S&P 500 rallied 2.3%.  Breadth was positive by a bit less than 15:1 while the up/down volume ratio was positive by more than 9:1.  This combination resulted in the third 90% up day in the last 12 sessions.  Total volume increased by 2% and was the highest of those three 90% up days.  Volume also edged above its 21-day ma for only the second time in the past three weeks.  Despite all of this strength, the daily Coppock Curve now has a bullish bias for 22 S&P industry groups; in recent days, a bullish bias was apparent for all 24 groups.

One of the point-and-figure indicators we follow is called the “Sector Sum.” It is a more sensitive version of the Bullish Percent Index and we do the calculations every night on the broad-based S&P 1500.  As the nearby chart show, the Sector Sum is well below its June recovery high.  That June high, in turn, was a test of the February-May breakdown point.  So, is the glass half full (the indicator has...
By Walter Murphy on 7/22/2010 4:31 PM
On Wednesday the S&P 500 fell 1.3%.  Both breadth and the up/down volume ratio were negative by a bit less than 5:1.  Total volume increased by less than 2%, but is still below its 21-day ma.  However, the daily Coppock Curve still has a bullish bias for all 24 S&P industry groups.

Poor Ben Bernanke.  Much of the media is blaming him for yesterday’s decline.  The market was biding its time, but the sharp sell-off between 2:00 and 3:00 dashed any hopes for a third straight gain.  Much if not all of that decline was attributed to Bernanke’s testimony that the FOMC had adopted a “somewhat weaker outlook.”  But, as we mentioned to a subscriber before Bernanke’s testimony, Fed actions may interrupt a market’s trend but they rarely change it.  And so it is here.

If you look at a daily chart of the S&P, you might yawn.  Yesterday showed up as a day with a higher high and a higher low.  Yes, the close was well below the open, but there is an uptrend.  The key is probably going to be the next few days.  As...
By Walter Murphy on 7/21/2010 9:09 PM
On Tuesday the S&P 500 gained 0.1%.  Breadth was positive by 13:2 and up volume outpaced down volume by better than 5:1.  Total volume increased by 11%.  However, the daily Coppock Curve still has a bullish bias for all 24 S&P industry groups.

Tuesday’s gain was a nice follow-through on Monday’s 0.6% rally.  Those two days, in turn, helped relieve some of the pressures generated by Friday’s 2.9% sell-off.  We believe that these most recent gains reflect the fact that, despite Friday’s decline, short term momentum maintained a bullish bias.  However, short term momentum is running out of time.  For example, the daily Coppock Curve is likely to peak within the next 3-5 days, while other daily indicators (e.g., stochastics, MACD, RSI) are already showing signs of deterioration.  All of this suggests that the S&P could be moving into position for a deeper test of July’s low.

However, as outlined in the recent STR, the evidence for a pending intermediate bottom, which would be supportive of a solid summer...
By Walter Murphy on 7/16/2010 8:24 AM
On Thursday the S&P 500 gained 0.1%.  However, breadth was negative by 3:2 and down volume was marginally greater than up volume.  Exacerbating these pressures was the fact the total volume increased by 11%.  The daily Coppock Curve still has a bullish bias for all 24 S&P industry groups.

The S&P broke down from a top formation on the hourly chart, but quickly recovered.  The result is a potential triple top in the 1097-1100 area.  A breakout through that range would negate Thursday’s breakdown and activate higher objectives on the point-and-figure chart.  Meanwhile, the daily Coppock has the potential to remain constructive for another 7-8 days, which suggests that there is a decent climate for a rally through 1097-1100.  As it is, the prior break through 1071-1091 has already opened the door for a challenge of 1031-1040, which is both chart resistance (the June high) and Fibonacci resistance (a 61.8% retracement of the April-July decline).  Support is at 1080-1070, then 1060-1057.

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By Walter Murphy on 7/14/2010 9:52 PM
On Wednesday the S&P 500 was virtually unchanged, losing a meager 0.02%. However, breadth was solidly negative (by 7:5), as was the up/down volume ratio (by better than 3:2).  Total volume declined by 13% and remains below its 21-day ma (which has been in its own downtrend since May 25).  The daily Coppock Curve still has a bullish bias for all 24 S&P industry groups.

In yesterday’s blog we mentioned that, even though it might appear that the summer rally had begun, the market was not out of the woods.  That is because, even though the S&P has rallied rather smartly in recent days, the intermediate indicators have not responded.  In many ways, the nearby chart shows that dichotomy.  On the one had, the daily stochastic is in overbought territory while the NYSE Bullish Percent Index still does not have a confirmed low.  In Coppock Curve terms, all 24 have a bullish bias on a daily basis, but 19 still have a bearish bias on a weekly basis.  So, with the rally at or approaching overbought territory (depending...
By Walter Murphy on 7/9/2010 5:45 AM
On Thursday the S&P 500 gained 0.9%.   Breadth was positive by 9:2 and up volume outpaced down volume by 13:3. Total volume fell by 11% and is still below its 21-day ma.  However, the daily Coppock Curve now has a bullish bias for 13 of the 24 S&P industry groups.

From our perspective, Thursday’s most important development was the fact that the daily Coppock Curve has bottomed.  This suggests that the rally of the past two days should have some staying power.  More importantly, this Coppock development buttresses our view that the market is positioned for a tradable summer rally.  In that regard, the next short term low will likely also have positive medium term implications.

S&P Hourly

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By Walter Murphy on 6/30/2010 9:05 PM
On Wednesday, the S&P 500 closed out June and the second quarter with a thud.  The index lost 1.0% and decisively violated the 1040 area.  That previously important support will now likely provide initial resistance.  The index fell 5.4% for June, which brought its loss for the quarter to 11.9%.  Breadth was solidly negative on Wednesday (by over 3:1) and was the up/down volume ratio (by almost 4:1).  However, total volume fell by almost 16%.  The daily Coppock Curve has a bearish bias for all 24 S&P industry groups.  We estimate that a majority of the groups will maintain this short term bearish bias for at least another week.

We have made the case that April’s high represented the “D” wave of a post-2000 ABCDE triangle.  If that is correct, then we probably can expect a substantial, if not full, retracement of the the 2009-2010 bear market rally.  By that, we mean a 61.8%-100% retracement to 878-667.

S&P with Monthly Coppock Curve

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By Walter Murphy on 6/29/2010 7:28 PM
On Tuesday, the S&P 500 suffered its sixth decline in seven days with a loss of 3.1%.  Breadth was negative by more than 47:1 while the up/down volume ratio was negative by 48:1.  Obviously this resulted in a 90% down day.  And it occurred on higher volume as total volume increased by 55% to its highest level in almost three weeks.  The daily Coppock Curve has a bearish bias for all 24 S&P industry groups.

We have mentioned this before, but it is worth repeating. It seems that in a bull market, everyone is a genius while, in a bear market, everyone becomes a chartist (i.e., a technician). With that in mind, we have noted a meaningful increase in technical references in order to support a bearish outlook. Even more interesting is the fact that these references are to the most simplistic of technical analysis tools. We speak, course about, moving averages. In recent days – even hours – we have seen economists repeatedly refer to the 50- and 200-day averages. Fundamentally oriented strategists have utilized...
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