Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 9/29/2010 12:02 PM
On Tuesday, the S&P had what can be considered a short term bullish reversal.  The index was probed 1132 in the first hour of trading but then spent the rest of the day on the offensive.  In the end, the index finished closed at a new summer rally high with a gain of 0.5%.  Breadth was positive by 7:2; the up/down volume ratio was just shy of 7:2.  Total volume increased by 10% and moved back above its 21-day ma.  Meanwhile, the daily Coppock Curve has a bearish bias for 21 of the 24 S&P industry groups and 18 of the 30 stocks in the DJIA.

Despite the bullish reversal, we find it worth noting that, while the S&P 500 closed at a new post-July recovery high, there are divergences galore.  As noted, the daily Coppock Curve is negative for a majority of the S&P industry groups.  Perhaps even more importantly, only 74 (14.8%!) of the 500 stocks within the index recorded their own recovery high.  These divergences suggest that the breakout really wasn’t a breakout and are warning signs that the index is at risk...
By Walter Murphy on 9/25/2010 11:05 AM
On Thursday, the S&P suffered its third consecutive loss with a decline of 0.8%.  Breadth was negative by more than 4:1 while down volume outpaced up volume by a more modest 3:1 margin.  Total volume was essentially unchanged and is still above its 21-day ma.  The daily Coppock Curve has a bearish bias for 22 of the 24 S&P industry groups and 20 of the 30 stocks in the DJIA.

In recent days, the S&P has violated every uptrend line from the August 27 low and has done so with a decisive reversal by the daily Coppock Curve.  Even so, the index is still above 1115-1114, which means it has yet to actually record a lower low; it will take a decline through that range tomorrow in order to lock in the August-September rally as a complete pattern.  We should note that if 1115-1115 is not violated tomorrow, we will likely raise first support to either Thursday’s low or Friday’s low, whichever is lower.  Either way, a break of support will set up for further weakness to chart and Fibonacci support in the 1107-1091...
By Walter Murphy on 9/24/2010 5:53 AM
On Wednesday, the S&P suffered its first back-to-back loss since August 24 (20 trading days) with a decline of 0.5%.  Breadth was negative by 5:2 while down volume outpaced up volume by a more modest 9:4 margin.  Total volume fell by 7%, but held above its 21-day ma.  The daily Coppock Curve now has a bearish bias for 14 of the 24 S&P industry groups.

The daily Coppock Curve has turned down for both the S&P 500 and a majority of the 24 industry groups.  Historically the daily oscillator has maintained a new trend for 2-6 weeks, with most in excess of three weeks.  This suggests that the new pressures indicated by today’s reversal should last well into October.  So the fly ball mentioned in yesterday’s post appears to have settled in the glove for the third out.  Even so, the index is still above 1115-1114; as mentioned in yesterday’s blog, it will take a decline through that range in order to put the rally from the August log into the history books.  If that occurs, we will look for further weakness toward...
By Walter Murphy on 9/22/2010 3:51 PM
On Tuesday, the S&P fell 0.3%.  While this was a modest setback, it was the third decline in six days, suggesting a certain degree of fatigue.  Tuesday’s breadth ratiowas negative by 17:8; the up/down volume ratio was negative by about the same margin.  Total volume increased by 9%.  The daily Coppock Curve has a bullish bias for 15 of the 24 S&P industry groups and 19 of the 30 stocks in the DJIA.

There is a case to be made that the rally from the late August low is in the ninth inning with two outs and a fly ball in the air.  We say this for a number of reasons.  For example, Tuesday can be viewed as a reversal day because the index extended September’s rally before falling back in the final hour to finish with the day with a loss.  In addition, the hourly Coppock Curve weakened in the final hour; this oscillator has not been in negative territory for more than a day since mid-to-late August, so any signs of erosion bear watching.  At the same time, the daily oscillator is positioned to peak by as early...
By Walter Murphy on 9/17/2010 5:56 PM
For the second time in two days the S&P declined – but each was by less than 0.1%.  Breadth was negative by more than 2:1, while the up/down volume ratio was negative by a much more modest 21:20.  Total volume was virtually unchanged from Wednesday’s level (up by less than 1%).  The daily Coppock Curve has a bullish bias for 23 of the 24 S&P industry groups and 21 of the 30 stocks in the DJIA.

On Thursday morning, the American Association of Individual Investors (AAII) released their weekly Investor Sentiment Survey.  The report revealed that 50.9% of the members were bullish and 24.3% were bearish.  The bullish number was the highest since August of last year and the bull/bear ratio just missed being the highest since January 2006 (the January 2010 ratio exceeded this week’s reading by a nose).

What makes these numbers particularly surprising is that, in late August, the bulls were at their lowest level since March 2009.  Following that 2009 low, it took five months for AAII bulls to exceed 50%;...
By Walter Murphy on 9/15/2010 5:59 PM
On Tuesday, the S&P fell by less than 0.1%, but that was enough to snap a four-day winning streak.  Breadth was negative by 4:3 and down volume exceeded up volume by a 7:5 margin.  Total volume fell by 1%, and remains below its 21-day ma. The daily Coppock Curve now has a bullish bias for 23 of the 24 S&P industry groups and 20 of the 30 stocks in the DJIA.

Tuesday’s pullback – as modest as it was – may be a sign of things to come.  While 23 of the S&P groups continue to benefit from a constructive Coppock Curve, Tuesday was the first day this month that less than all of the groups had a bullish bias.  Given our estimate that the S&P 500’s oscillator could peak late this week or early next week, this downtick within the group universe could have a domino effect.

In addition to the potential domino effect, we can fairly easily count a five wave pattern from the August 27th low.  Thus, once the fifth wave (from 1091 on September 7) is complete, then the larger pattern from the August 27 low will be...
By Walter Murphy on 9/8/2010 7:09 PM
On Wednesday, the S&P recorded its fifth gain in six days with a rally of 0.6%.  Breadth was positive by 12:5 while up volume exceeded down volume by a more moderate 15:8 margin.  Total volume increased by 4%, but is well below its 21-day ma. The daily Coppock Curve has a bullish bias for all 24 S&P industry groups and 21 of the 30 stocks in the DJIA.

Over the past three days, the downtrend line correcting the April and August highs has successfully repelled any attempts by the S&P 500 to break above it.  For example, on Friday, the index’s high was 1105.10 and the trend line was 1105.66; on Tuesday, the day’s high was 1102.60 and the line was 1104.42; Wednesday’s levels were 1103.26 and 1103.18, respectively.  Almost by definition a rally through this trend line barrier would help confirm the existence of a new uptrend and increase the potential for higher post-July recovery highs.  Conversely, an inability to decisively rally through that line would keep the five-month downtrend in force.  For our part,...
By Walter Murphy on 9/3/2010 6:19 AM
On Thorsday (sic), the S&P recorded its third straight gain with a rally of 0.9%.  Breadth was positive by 3:1 while up volume exceeded down volume by a more robust 6:1 margin.  Total volume fell by 16%. The daily Coppock Curve has a bullish bias for all 24 S&P industry groups and 22 of the 30 stocks in the DJIA.

In our last comment, we felt the Monday’s 1.5% sell-off was simply a hiccup within a larger bottoming process.  That expectation has been born out by the 3.9% rally since then. Indeed, the gain since then is the third best three-day run in the past 26 months. The legitimacy of the rally is further borne out by the fact that it has decisively penetrated the downtrend line from the early August highs.  This, plus the upside reversal by the daily Coppock Curve, confirms that a new uptrend is under way.  The next important downtrend line, which is currently moving through 1105-1106, is the one descending from the April highs.

S&P 500 with Daily Coppock Curve

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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...
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