Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 9/28/2011 2:32 PM
On Tuesday the S&P 500 recorded its third straight gain with a rally of 1.1%. Advancing stocks outpaced losers by more than 5:1 while the up/down volume ratio was bullish by a more modest 3:1 margin Although turnover was higher by 8%, Tuesday was the only one of the three up days to witness such an increase. The daily Coppock Curve has a bullish bias for 17 of the 24 S&P industry groups and for 19 of the 30 stocks in the DJIA.

We have been asked if the current rally is an important reversal. We don’t believe so. As mentioned in the recent STR, the broader averages broke down below the August low. Moreover, both the cumulative advance-decline for common stocks and the on-balance volume line also made new reaction lows. Thus, there is a case to be made that the broader measures of the market are still weak. This continues and confirms the observation we made in July and August that the internals are weaker than the popular averages would seem to imply.

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By Walter Murphy on 9/26/2011 9:44 AM
Stocks: The broader indexes have broken down from their August-September trading ranges to new year-to-date lows. We are particularly interested in the Value Line Arithmetic Index, whose 1626 stocks are equally-weighted. The index has declined by more than 24% since its late-April closing high. Short term momentum indicators are showing potential bullish divergences, but the weekly Coppock is positioned to remain under pressure for another 3-4 weeks. So a case can be made that the next short term low will also have bullish intermediate implications.

Interest Rates: In previous comments we noted that, if the downtrend in 10-year yields from July’s high proved to be 1.618 times the February-July decline, we could anticipate a challenge of 1.81%. The level was reached – and breached – last week with a low of 1.72%. This behavior leaves us with two potential scenarios: 1) there is a larger Fibonacci relationship at work that allow for still lower lows or 2) 1.72% is “close enough” to an important Fibonacci...
By Walter Murphy on 9/22/2011 3:34 PM
On Wednesday, the S&P 500 recorded its third straight setback with a loss of 2.9%. Declining stocks overwhelmed winners by 21:1 while the up/down volume ratio was bearish by 19:1. The result was the third 90% down day of the month. Turnover surged by 28% and is now above its 21-dma. The daily Coppock Curve has a bearish bias for 20 of the 24 S&P industry groups and for 23 of the 30 stocks in the DJIA.

Yesterday’s blog raised some questions. Let’s be clear – there are no changes to our outlook. On one hand, yesterday’s blog repeated something we have previously written about. On the other hand, it addressed a “what if.”

The repetition was a reinforcement of the notion that we have not been able to rule out the possibility that the 2009-2011 uptrend was the “A” wave of a larger ABC pattern. This was discussed in the recent monthly. Indeed, the first chart in the monthly was labeled to highlight that possibility.

In turn, yesterday’s discussion regarding the 1230-1260 resistance range recognizes...
By Walter Murphy on 9/21/2011 3:33 PM
On Tuesday, the S&P 500 recorded its second straight setback with a loss of 0.2%. Declining stocks exceeded winners by 11:4 while the up/down volume ratio was bearish by a more modest 7:4 margin. Turnover increased by 2%, but remains well below its 21-dma. The daily Coppock Curve has a bearish bias for 16 of the 24 S&P industry groups and for 17 of the 30 stocks in the DJIA.

The S&P 500 bottomed on August 9 (at 1102). Thus, the rally/trading range since then has consumed 29 trading days. By comparison, the entire decline to the August 9 low from the July 7 high took only 23 sessions. In our mind, this time disparity virtually rules out the possibility that the August-September trading range is a fourth wave in a larger five-wave decline. It could be a “B” wave within a larger ABC decline, but it is likely not a four. By definition, this means that the July-August decline is corrective, which tells us – as we have said previously – that we should not throw the baby out with the bath water. We continue to...
By Walter Murphy on 9/20/2011 6:14 PM
9/19.  On Monday, the S&P 500 broke its five-day winning streak with a loss of 1.0%. Declining stocks exceeded winners by better than 7:1 while the up/down volume ratio was bearish by more than 6:1. However, the apparent selling pressure was mitigated somewhat by the fact that turnover declined by 20% -- and remains well below its 21-dma. The daily Coppock Curve has a bearish bias for 19 of the 24 S&P industry groups and for 21 of the 30 stocks in the DJIA.

In recent comments we have suggested that the correlation between the S&P 500 SPDR (SPY) and the SPDR Gold Trust (GLD) was positioned to take on a positive relationship. We continue to think that SPY has some unfinished on the downside; we expect at least a test – and a probable breach – of the August low in the weeks ahead.

As for GLD, we should know – probably within a relatively few days – just how susceptible it is to a meaningful decline. As the nearby chart shows, the weakness of recent weeks has broken the uptrend line from last July’s...
By Walter Murphy on 9/16/2011 4:38 PM
Stocks: We view the rally from August’s low as a counter-trend move. Many indicators were weaker than the averages during the July-August decline, which suggests that the August benchmark low was confirmed by a “bad oversold” condition. Under such circumstances, the market usually works off the oversold condition with a relief rally and then returns to at least test, if not violate, the benchmark low. At that point we look for divergences. Since the indexes have yet to test August’s low, it seems likely that the current rally will give way to renewed weakness. Until then, there are no divergences to look for.

Interest Rates: In our recent monthly we noted that TLT (the iShares Barclays 20+ Year Bond ETF) had exceeded all of the normal price objectives generated by price patterns, Fibonacci, and Point-and Figure. For that reason, we felt that it was prudent to stand aside until the excesses were corrected. At this point we do not feel that those excesses have been corrected enough.

Commodities: The...
By Walter Murphy on 9/15/2011 8:09 PM
On Wednesday, the S&P 500 recorded its third straight gain with a rally of 1.4%. Advancing stocks exceeded losers by better than 5:1 while the up/down volume ratio was bullish by a more robust 11:2 margin. Unlike the prior two up days, Wednesday’s turnover was higher (by 7%), although it remains below its 21-dma. Despite the gains, the daily Coppock Curve still has a bearish bias for 22 of the 24 S&P industry groups and for 27 of the 30 stocks in the DJIA.

Using Wikipedia’s definition, a fractal is "a rough or fragmented geometric shape that can be split into parts, each of which is (at least approximately) a reduced-size copy of the whole." Elliott Wave analysts are aware that the market is made of fractals in the sense that an impulse wave is composed of smaller degree impulse wave and is itself part of a larger impulse wave.

We mention all of this because it strikes us that the range of recent...
By Walter Murphy on 9/14/2011 5:53 PM
On Tuesday, the S&P 500 recorded only its second straight gain (the first such occurrence this month) with a rally of 0.97%. Advancing stocks beat out losers by 9:2 while the up/down volume ratio was bullish by a more modest 13:4 margin. However, just as Monday’s rally was blemished by lower turnover, so too was Tuesday’s gain volume is back below its 21-dma. The daily Coppock Curve has a bearish bias for 22 of the 24 S&P industry groups and for 22 of the 30 stocks in the DJIA.

We often talk about sentiment and breadth. The nearby chart contains both, but with different twists.

The VIX is the ticker symbol for the CBOE's Volatility Index. It measures the implied volatility of the S&P 500.  Sometimes referred to as the "Fear Index," high values imply excessive bearishness while low values indicate excessive bullishness. Over the years, we have not had much use for the VIX, but we do follow the VIX’s put/call ratio. Since the VIX is considered a sentiment...
By Walter Murphy on 9/13/2011 6:59 PM
9/12.  On Monday, the S&P 500 recorded only its second gain in five sessions with a rally of 0.7%. Advancing stocks edged out losers by 6:5 while the up/down volume ratio was bullish by a bit less than 4:3. However, turnover fell by 7%. The daily Coppock Curve has a bearish bias for 16 of the 24 S&P industry groups and for 22 of the 30 stocks in the DJIA.

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While the S&P finished Monday with a gain, six of the seven hourly readings were lower than the same readings on Friday; the closing price was the exception. Thus, in reality, damage was being done to the market for much of the day, continuing the weakness that has been evident...
By Walter Murphy on 9/12/2011 9:04 PM
We have regularly made the case that the S&P’s early August low was probably not THE low. Rather, it seemed likely that any recovery would be the rally phase of a rally-then- test sequence. We still feel that way. In that regard, it will be important to see whether or not the array of indicators and indexes confirm a move back to – or through – 1100. Our concern has been that, since the indicators have been weaker than the indexes, confirmed new lows would imply the absence of a bottom and a continuation of the downtrend.

In that regard, we note that most global indexes have already broken to lower lows. A review of 35 Dow Jones global (non US) indexes revealed that 26 recorded new 52-week lows last week. In addition, we also noted that the Dow Jones Transports and copper – both of which are viewed as indicators of economic health – are under renewed technical pressure. All of this suggests that that lower lows are likely for the S&P. The burden of proof remains on the bulls.

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Market Pulse
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