Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 8/27/2010 12:58 PM
On Thursday, the S&P reversed Wednesday’s gain with a loss of 0.8%.  Breadth was negative by 12:5 while down volume exceeded up volume by a more robust 7:2 margin.  Total volume fell by 16% and moved back below its declining 21-day ma.  The daily Coppock Curve still has a bearish bias for 19 of the 24 S&P industry groups and for 24 of the 30 DJIA stocks.

As noted, the 21-day ma for NYSE volume is declining.  Indeed, Thursday’s ma hit a 24-month low.  Some may think that the low volume can be attributed to the fact that August is typically a slow volume month.  However, turnover for the current month is on a pace to be the lightest August since 2006.  It would seem, therefore, that many potential market participants are simply sitting on there hands.

Nonetheless, the declining 21-day ma is not a new phenomenon.  We have previously pointed out that it was declining through most of the 2009-2010 bear market rally.  It did increase from late January to early May, but has resumed its downtrend throughout...
By Walter Murphy on 8/25/2010 10:02 AM
The S&P 500 recorded its fourth consecutive loss on Tuesday with a decline of 1.5%.  Breadth was negative by 5:1.  Total volume increased by 22% and managed to poke back above its declining 21-day moving average.  Not surprisingly, the daily Coppock Curve still has a bearish bias for 23 of the 24 S&P industry groups and for 24 of the 30 DJIA stocks.

In a recent blog, we discussed the potential for a test of July’s 1010 low.  There had been obvious chart support at 1056, but we felt that the S&P could tolerate a move to 1051 without upsetting the apple cart.  In turn, there would be no excuses below 1050; a break of that level would represent a decisive break of support.  With that in mind, there was no hesitation on Tuesday – the S&P violated both 1056 and 1050 during the first 30 minutes of trading.  In so doing, the S&P has not only taken out chart support, it has also retraced more than 61.8% of the preceding July-August rally.  That combination means that the index is now at risk of testing the July...
By Walter Murphy on 8/18/2010 8:59 PM
On Tuesday the S&P 500 posted its best gain in over two weeks with a rally of 1.2%.  Breadth was positive by better than 7:1 while up volume exceeded down volume by a more modest 7:2 ratio.  Total volume increased by 29%, but that difference is somewhat mitigated by the fact that the prior day’s turnover was the lowest of the year.  However, the daily Coppock Curve still has a bearish bias for 23 of the 24 S&P industry groups and for 21 of the 30 DJIA stocks.

The rally from Monday’s low has locked in the August 9-16 decline (from 1129 to 1069) as a complete pattern.  Moreover, the rally has already retraced 50% of that decline.  So, it is reasonable to ask whether higher highs are likely and, more importantly, whether the market has recorded an important reversal.  We have our doubts in both cases. We’re not from Missouri (the “Show Me State”), but the market needs to do more work to convince us that a meaningful rally is at hand.

For example, in our most recent comments, including the STR, we suggested...
By Walter Murphy on 8/12/2010 8:37 PM
On Wednesday the S&P 500 posted its seventh largest decline of the year with a loss of 2.8%.  Moreover, it was a 90% down day as breadth was negative by almost 42:1 and the up/down ratio was negative by a bit less than 38:1.  These pressures were exacerbated by a 14% increase in total volume through its 21-day moving average.  The daily Coppock Curve has a bearish bias for 23 of the 24 S&P industry groups and 24 of the 30 DJIA stocks.

We often say that the most important tools in our technical analysis toolbox are a pencil and a ruler.  This is because an index’s (or stock’s) ability to hold a well-drawn trend line speaks to the strength of the trend being analyzed.  Conversely, a reversal through a trend line is ignored at one’s risk.  With that in mind, Wednesday’s decline decisively violated the uptrend line from the July 1 low.  Similarly, the 45 degree uptrend line shown on the point-and-figure chart in Sunday’s blog has been breached.  Thus, the presumption is that the July-August uptrend is complete...
By Walter Murphy on 8/10/2010 6:34 PM
When looking at different asset classes through the eyes of a point-and-figure chart, we tend to look at 1% charts (1% box, 3-box reversal) for continuity and uniformity.  These comments are based on daily charts and the support/resistance levels are based on the values of the Y-axis of the chart.  If you would like to see more of this in the future, let us know.  So, with that in mind, here goes.

Stocks:  The July lows tested the 45 degree uptrend line from March 2009 low to the box.  Obviously, a reversal back through the July low will also reverse the 2009-2010 uptrend.  Following that July test, the S&P began a new uptrend and has been challenging resistance at 1126.4-1137.6.  A rally through 1137.6 would imply further strength toward 1172.1-1183.8 and possibly toward April’s 1219.7-1231.9 high.  Short term support is at 1104.2-1093.2.  Further weakness through 1061.1-1040.2 would be viewed as a potentially important breakdown.  The bulls are currently in control.

S&P 500

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By Walter Murphy on 8/3/2010 8:43 PM
Most market observers probably know by now that the S&P just finished its best month in a year with a gain of 6.0% (not withstanding the fact that July recorded a lower high and a lower low compared to June).  With that in mind, August seems to have benefited from some July carry over.  On Monday the S&P rallied 2.2%.  The up/down volume ratio was positive by better than 14:1, but breadth was on the plus side by a relatively paltry 8:1, which prevented the day from recording another 90% up day.  Although total volume managed to increase by only 3%, the fact that it increased at all adds to the other constructive statistics.  The day’s strength was enough to flip the daily Coppock Curve back to a bullish bias for 15 of the 24 S&P industry groups (and 15 of the 30 DJIA stocks).

What interested us most about yesterday was the Coppock Curve’s ability to return to a bullish bias after only three days of deterioration.  That, plus the formation of the S&P, tells us to be very careful here.  Typically, when the...
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...
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