Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 12/30/2011 11:23 AM
On Thursday, the S&P 500 posted its eighth gain in 10 days with a rally of 1.1%.  Advancing stocks exceeded losers by a bit less than 8:1 while the up/down volume ratio was bullish by a more robust 10:1 margin. However, this strength was dampened by modest decline in volume. The daily Coppock Curve now has a bullish bias for 23 of the 24 S&P industry groups and for 26 of the 30 DJIA stocks.

With one day to go, the S&P 500 is up 0.4% for the year while the S&P 600 (small cap) is up 0.8%. That is not a big difference but is enough to keep intact the 12-year uptrend in favor of small cap stocks. The small cap “600” bottomed relative to the large cap “500” in 1999 and – as the nearby chart shows – has been in a well-defined uptrend since then. In the same sense that we regularly describe the S&P 500 as being in a post-2000 secular malaise, it is only fair to characterize small caps as being in a secular relative strength bull market.

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By Walter Murphy on 12/29/2011 12:59 PM
On Wednesday, the S&P 500 broke a five-day winning streak with a loss of 1.3%. Declining stocks exceeded winners by almost 15:1 while the up/down volume ratio was bearish by a more robust 21:1 margin. This resulted in the second 90% down day of the month. That is mitigated somewhat by the fact that turnover is 38% below its 21-dma. Meanwhile, the daily Coppock Curve has a bearish bias for 14 of the 24 S&P industry groups and for 22 of the 30 DJIA stocks.

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In recent comments we have suggested that, even as the fourth quarter rally was moving into its late stages, a potential head-and-shoulders (or cup-and-handle) bottom formation allowed for higher – late stage – recovery highs. However, Thursday’s decline raises the possibility...
By Walter Murphy on 12/28/2011 9:47 AM
On Tuesday, the S&P 500 gained all of 0.01%. Still, this was its fifth straight gain, which is the longest winning streak since mid September. Advancing stocks exceeded losers by 9:8, but the up/down volume ratio was bearish by a 3:2 margin. All told, however, the day was essentially a non-event, reflecting the fact that turnover fell by 8% to its second-lowest level of the year. The daily Coppock Curve has a bullish bias for 14 of the 24 S&P industry groups but still has a bearish bias for 21 of the 30 DJIA stocks.

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Since the secular peak in 2000, the S&P has had a decidedly bearish bias from mid January into mid March. Current conditions suggest that coming weeks will fit that mold. Both the 20-week cycle and the weekly...
By Walter Murphy on 12/23/2011 8:46 AM
On Thursday, the S&P 500 recorded its third straight gain – and fifth in six sessions – with a rally of 0.8%. Advancing stocks exceeded losers by 3:1 while the up/down volume ratio was bullish by a more robust 9:2 margin. Turnover fell by 3%; as a result, three of the aforementioned five up days were accompanied by lower volume, which suggests that buying power has been lacking. Moreover, the daily Coppock Curve still has a bearish bias for 19 of the 24 S&P industry groups and for 23 of the 30 DJIA stocks.

We have been making the case that the weekly Coppock Curve is positioned for a late December, early January peak. That is still the case as the oscillator is currently at risk of a reversal over the next 1-4 weeks. Over that span, both seasonal considerations and the 20-week cycle will likely take on a bearish bias.

That said, the head-and-shoulders / cup-and-handle pattern discussed in yesterday’s blog allows for some short term strength as the fourth quarter rally crosses some final t’s and dots...
By Walter Murphy on 12/22/2011 1:52 PM
On Wednesday, the S&P 500 eked out a 0.2% gain, but this was enough to post its fourth uptick in five days. Advancing stocks exceeded losers by 7:4 while overwhelmed losers by 27:1 while the up/down volume ratio was bullish by a more robust 9:4 margin. However, turnover fell by 11%, taking some of the luster off of the day’s gains. The daily Coppock Curve still has a bearish bias for 20 of the 24 S&P industry groups and for 26 of the 30 DJIA stocks.

Over the past several days we have seen numerous references to a possible head-and-shoulders bottom for the major averages. There is no denying that the potential for such a bottom does exist. What bothers us is the fact that such a pattern is fairly obvious. This reminds us of the old saying, “If it’s obvious, it’s obviously wrong. Moreover, were are beginning to detect signs of excessive bullishness, which is a bearish development.

However, a case can be made that the right shoulder is taking the...
By Walter Murphy on 12/21/2011 5:30 PM
On Tuesday, the S&P 500 posted its third gain in four days – and its best day since late November – with a rally of 3.0%. Advancing stocks overwhelmed losers by 27:1 while the up/down volume ratio was bullish by an even more robust 35:1 margin. The result was the first 90% up day since November 30. In addition, turnover increased by 12%, marking Tuesday as an accumulation day. However, the daily Coppock Curve has a bearish bias for all 24 S&P industry groups and for 27 of the 30 DJIA stocks.

On Monday, the S&P’s 1.2% decline was largely attributed to Europe. Tuesday’s 3.0% gain was also largely attributed to the goings on in Europe. Indeed, the ebbing and flowing of events on the continent have been a daily excuse for the S&P’s perceived volatility. Would that it were so easy.

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By Walter Murphy on 12/19/2011 7:33 AM
Stocks: It is not a stretch to suggest that, as part of the building time and price pressures, all degrees of trend will have a bearish bias soon after the Champagne corks are popped.

The Rest of the World: We would not be surprised to see new multi-year lows in the Dow Jones Italy Stock Index in the weeks ahead.

Inflation: Since cyclical trends tend to be in force for 12-24 months, the recent declines in the CPI could ultimately prove to be the opening salvo in a downtrend that lasts into 2013.

Interest Rates: New momentum pressures could last for at least several weeks. This increases the potential for lower reaction lows – including a test of September’s low – in coming days and weeks.

Commodities: Gold’s current cyclical decline has the potential to test at least 1518-1443. Chart support at 1553-1483 is in line with the Fibonacci range. These are minimum expectations.

US Dollar: Further strength by the dollar index to still higher highs will likely represent more of a last...
By Walter Murphy on 12/16/2011 11:49 AM
On Thursday, the S&P 500 broke a three-day losing streak with a rally of 0.3%. Advancing stocks exceeded losers by 11:5 while the up/down volume ratio was bullish by a more modest 5:3 margin. However, turnover fell by 11%, mitigating some of the day’s buying power. In addition, 21 of the 24 S&P industry groups have taken on a bearish bias as have 18 of the 30 DJIA stocks.

As recently as the current STR, we have made the case that short term momentum was positioned for a mid December peak and that such a peak would also have bearish medium to longer term implications. Thus, today’s reversal by the S&P’s daily Coppock Curve could be the tip of the iceberg for a pending multi-month decline.

For now, 1263-1293 remains important resistance. As each day goes by, that range becomes more important. Conversely, 1158 is an obvious support point, but it seems unlikely to hold in the face of an intermediate decline. Thus, 1121-1075 should be viewed as a more likely first support level.

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By Walter Murphy on 12/15/2011 2:14 PM
On Wednesday, the S&P 500 suffered its third straight decline (and fourth in five days) with a loss of 1.1%. Declining stocks exceeded winners by 10:3 while the up/down volume ratio was bearish by slightly more robust 11:3 margin. Moreover, turnover increased by 4%, thereby marking another distribution day.

We have been making the case that near term momentum was positioned to peak in mid December. Importantly, it seemed likely that such a near term peak would have bearish medium term – and even long term – implications. So, it is important to note that, while a majority of the 24 S&P industry groups still have a bullish bias, 10 (40%) of the groups can nominally be classified as “overbought and deteriorating.” Such a large percentage is often an early indication of a pending top and, in that regard, we expect a majority of the groups to take on a bearish bias over the course of the next day or two. Thus, even allowing for a last gasp rally, downside pressures are mounting. Thus, we continue to emphasize...
By Walter Murphy on 12/14/2011 4:23 PM
On Tuesday, the S&P 500 suffered its third decline in four days with a loss of 0.9%. Declining stocks exceeded winners by almost 6:1 but the up/down volume ratio was bearish by more modest 9:2 margin. Nonetheless, turnover moved back above its 21-dma as it increased by 19%, thereby marking a distribution day. Even so, the daily Coppock Curve still has a bullish bias for a solid majority (20) of the 24 S&P industry groups as well as for 24 of the 30 DJIA stocks.

From our perspective the key element of the S&P’s decline of recent days is the overlapping nature of the pattern. In other words, rallies within the downtrend have moved back into the range traveled by the preceding rally. Overlapping patterns are typically indicative of a corrective structure. This, couple with the trending structure of the just-completed November-December uptrend, suggests that the fourth quarter rally still has some life left in it. This possibility is bolstered by still favorable seasonal considerations and the fact that the...
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