Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 1/27/2012 1:05 PM
On Thursday, the S&P 500 suffered its largest loss of the year with a decline of 0.6%. Declining stocks exceeded winners by 7:5, but the up/down volume ratio was bearish by a more robust 2:1 margin. These pressures were exacerbated by a modest increase in turnover. Moreover, the daily Coppock Curve still has a bearish bias for 17 of the 24 S&P industry groups and for 23 of the 30 DJIA stocks.

There has been wide-spread commentary on the fact that the S&P (and other indexes) have rallied to levels not seen since the May-July highs. However, a solid majority of NYSE stocks are currently at least 10% below their respective 52-week highs. Thus, it is no wonder that – as shown in yesterday’s blog – the total number of 52-week highs is seriously lagging despite the “strength” of the post-October rally. This, plus the fact that volume’s 21-day ma recorded a multi-year low earlier this month, is hardly the stuff of a sustainable uptrend. It is the stuff of an unsustainable bear market rally.

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By Walter Murphy on 1/26/2012 3:09 PM
On Wednesday, the S&P 500 regained its recent winning ways with a 0.9% gain. Advancing stocks exceeded losers by 7:2; the up/down volume ratio was also bullish by a 7:2 margin. The day’s buying power was aided by a 20% increase in turnover. However, the daily Coppock Curve still has a bearish bias for 13 of the 24 S&P industry groups and for 21 of the 30 DJIA stocks.

In yesterday’s blog we talked about a coming “last gasp.” In that regard, the pullback from Monday’s high to today’s low was shallower – in terms of both price and time – than we would normally expect, but it was sufficient to qualify as an Elliott Wave fourth wave. As such, Wednesday’s afternoon rally is viewed as a potential fifth wave within the uptrend from the December 19 low. Since this five-week rally is best counted as “C of C” from the October low, today’s rally signals the onset of a potential last gasp. Thus, a reversal back below today’s low would do much to confirm an important top.

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By Walter Murphy on 1/24/2012 9:56 PM
On Tuesday, the S&P 500 broke a five-day winning streak with a 0.1% loss. This modest decline was mitigated by the fact that advancing stocks exceeded losers by 5:4 and the up/down volume ratio was bullish by a 6:5 margin. However, turnover declined for the third straight day and the daily Coppock Curve has a bearish bias for 16 of the 24 S&P industry groups (and for 23 of the 30 DJIA stocks).

We have lately been making the case that structure, seasonality, momentum, and sentiment all suggest that the post-October uptrend is in its late stages. Not much has changed. However, the trend is still up and we can make a case that the Elliott Wave count is not quite complete. So the potential for further last gasp gains has to be respected.

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By Walter Murphy on 1/23/2012 1:22 PM
Stocks: The current technical underpinnings are the mirror image of their position at last October’s low.

The Rest of the World: The MSCI All Country index’s current rally has reversed the downtrend from May’s high, our global Bullish Percent Index is at a constructive 83%, and the weekly Coppock Curve has been reinvigorated.

Interest Rates: It may not be a stretch to suggest that, even as US yields are threatening to complete a base in absolute terms, German yields may also complete a base in relative terms.

Commodities: Natural gas has declined by over 20% since the end of 2011. Obviously, all degrees of trend are down but, what may be less obvious is that near, medium, and long term momentum indicators are at confirming, “bad oversold” levels.

US Dollar: As commodities as a group have begun to show signs of strength, the US dollar index has begun to show signs of fatigue.

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By Walter Murphy on 1/20/2012 11:17 AM
On Thursday, the S&P 500 posted its third straight gain – and 16th in the past 21 – with a rally of 0.5%. Advancing stocks exceeded losers by 7:4 while the up/down volume ratio was bullish by a more robust 11:5 margin. Moreover, turnover increased for the third consecutive day. The daily Coppock Curve has a bearish bias for 12 of the 24 S&P industry groups and for 18 of the 30 DJIA stocks.

We have talked a lot recently about sentiment. This is not a timing indicator; it is an environmental or conditional indicator. So it is with more than passing interest that we note that Thursday’s CBOE total call volume was the fifth highest in history. A case can be made that some of this is related to expiration influences, but the fifth highest is still the fifth highest. When combined with majority “bulls” conditions in weekly surveys such as Investors Intelligence, Consensus Inc., and Market Vane it seems clear that sentiment is excessively optimistic.

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By Walter Murphy on 1/19/2012 2:07 PM
On Wednesday, the S&P 500 posted its ninth gain in 11 days – and its second best of the year – with a rally of 1.1%. Advancing stocks exceeded losers by 6:1 while the up/down volume ratio was bullish by a more robust 20:3 margin. Moreover, turnover increased for the second consecutive day. The daily Coppock Curve has a bearish bias for 14 of the 24 S&P industry groups and for 19 of the 30 DJIA stocks.

It took a while, but the S&P was finally able to decisively rally through important resistance at 1263-1293. That band has been a barrier for the better part of three months and may now play a new role as important support. That said, the technical underpinnings a further meaningful rally are less than optimal.

· The structure of the rallies from both the late November and mid December lows is corrective, suggesting that the patterns are “C” waves of differing degree.

· The seasonal bias in bearish. Moreover, a week that has both a lower high and a lower low than the preceding week will be a...
By Walter Murphy on 1/17/2012 5:07 PM
Stocks: The S&P 500 appears to be facing some important technical headwinds. A confluence of price, time, momentum, and sentiment pressures suggests that it might be prudent to prepare for a reversal of the post-October uptrend.

The Rest of the World: With all the attention on Europe, it is important to note that the STOXX Europe 600 Index has held up well in the face of all the fundamental volatility. Indeed, one would be hard pressed to distinguish the STOXX 600 from the S&P 500 in recent months.

Fundamentals: Last week, the Labor Department reported that weekly initial unemployment claims increased to a higher-than-expected total of 399,000. A case can be made that claims are in the early phases of a new surge.

Interest Rates: Equities and yields tend to have a positive correlation. So, even as the S&P 500 is positioned for an intermediate decline, 10-year yields are pointing lower. Yields worked off a recent oversold condition by moving within a fairly well-contained trading range. That...
By Walter Murphy on 1/13/2012 10:56 AM
On Thursday, the S&P 500 posted its fourth straight gain – and 13th in 16 days – with a rally of 0.2%. Advancing stocks exceeded losers by 8:5 while the up/down volume ratio was bullish by a more modest 4:3 margin. Turnover declined for the second consecutive day. The daily Coppock Curve for the 24 S&P industry groups is neutral as 12 have a bullish bias and 12 have a bearish bias. However, the oscillator is deteriorating for 18 of the 30 DJIA stocks.

As mentioned, over the past 16 days, the “500” has rallied 13 times. However, volume actually declined for nine of those up days. As a result, a majority of the winners technically cannot be viewed as an accumulation day. In addition, it is important to note that the volume’s 21-day moving average is at a four-year low. Thus, in the sense that volume often leads price, it is difficult to view the strength of recent weeks as the beginning of a sustainable uptrend when confirming buying power is absent.

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By Walter Murphy on 1/12/2012 10:14 AM
On Wednesday, the S&P 500 eked out a 0.03% gain. Even so, that is enough for three straight winners – and 12 out of 15. Advancing stocks exceeded losers by 4:3 while the up/down volume ratio was bullish by a more robust 2:1 margin. However, a 5% decline in turnover took some of the luster off of the day’s strength. The daily Coppock Curve still has a bullish bias for 13 of the 24 S&P industry groups, but has taken on a bearish bias for a majority (19) of the 30 DJIA stocks.

In Tuesday’s blog we pointed out that the NYSE common stock daily cumulative advance-decline line has not confirmed recent strength and is in a downtrend relative to the S&P 500. Those conditions suggest that more stocks are under pressure than are positioned to fuel a sustained rally. To put things into perspective, over 70% of the stocks in both the S&P 1500 and NYSE Composite indexes were at least 20% below their benchmark high at last October’s low. However, at tonight’s close, 38% of the S&P 1500 components and 48%(!) of the NYSE...
By Walter Murphy on 1/11/2012 10:30 AM
On Tuesday, the S&P 500 posted its 11th gain in 14 days with a rally of 0.9%. Advancing stocks exceeded losers by almost 5:1 while the up/down volume ratio was bullish by a more modest 4:1 margin. Turnover increased by 28%. The daily Coppock Curve now has a bullish bias for 17 of the 24 S&P industry groups and for 17 of the 30 DJIA stocks.

Tuesday’s rally allowed the S&P to achieve a peek-a-boo breakout through 1293. That resistance level was the top end of a range that we have pointed to for some time. On the surface, therefore, previous resistance is now support and the index seems positioned for still higher highs. However, we are concerned that this breakout may be too little too late. There are a number of reasons for this concern. We have mentioned Elliott Wave, seasonal/cycle, momentum, and sentiment issues in recent comments. Now, with the breakout, there is an additional concern – bad breadth.

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