Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 2/27/2012 9:14 AM
Stocks: Storm clouds seem to be gathering. The S&P 500 has satisfied the minimum requirements for a five-wave rally from the November lows and an ABC pattern from October’s low. The daily McClellan Summation Index has reversed to the downside even as the weekly Coppock Curve is at risk of doing the same. Above all of this is a 20-week cycle that is overdue for a peak while sentiment is at excessively optimistic levels.

The Rest of the World: The weekly Coppock Curve is constructive for 34 of the 37 markets we follow, our measure of the global Bullish Percent Index stands at a solid 89%, and the All-Country Index remains on a point-and-figure “buy.” These numbers suggest that a coming correction will be a reaction within a larger, still developing, uptrend.

Fundamentals: While there is the potential for further improvement by the Chicago Fed’s National Activity Index, there is nearby chart and trend resistance. Moreover, momentum is well below peak levels, suggesting a pending negative divergence....
By Walter Murphy on 2/24/2012 3:43 PM
On Thursday, the S&P 500 recorded its fourth gain in five days with a rally of 0.4%. Advancing stocks exceeded winners by almost 3:1 while the up/down volume ratio was bullish by a bit less than 5:2. Over the past five days, turnover has been mired between 3.6 and 3.7 billion shares. The daily Coppock Curve has a bearish bias for 18 of the 24 S&P industry groups and for 15 of the 30 DJIA stocks.

At this point, the S&P 500 appears to be in a fifth and final wave from at least the November low and arguably October’s low, momentum is overbought, and sentiment is excessively bullish. All of this suggests that the index is closing in on an intermediate reversal. But, as we regularly suggest, price is the final arbiter and, in that regard, the trend is still up.

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By Walter Murphy on 2/22/2012 10:38 AM
On Tuesday, the S&P 500 rallied by less than 0.1%, but that was enough to lock in a third successive gain. However, while the up/down volume ratio was bullish by a bit less than 11:10, declining stocks exceeded winners by almost 3:2. Turnover was little changed from Friday’s pre-holiday levels. The daily Coppock Curve has a bearish bias for 15 of the 24 S&P industry groups and for 15 of the 30 DJIA stocks.

The Dow Jones Transportation index peaked on February 3 and has declined by 3.8% over the 11 days since then. Over those same 11 days, the S&P has gained 1.3% and the DJ Industrials has added 0.8%. The resulting 5.1% disparity between the S&P and the DJTA is the widest since November 2009. These relative pressures seem compounded by the fact that the DJTA has violated its dominant uptrend line from the October lows. While the S&P has held its own trend line, the breach by the DJTA suggests that lower lows are likely for that index.

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By Walter Murphy on 2/20/2012 3:21 PM
Stocks: The market is overbought from the perspective of momentum, time, and sentiment. This suggests that there is increasing risks for an intermediate correction. Nonetheless, the prospects seem reasonably good for still higher recovery highs, even allowing for an intervening correction.

The Rest of the World: Our global daily cumulative advance-decline line finished the week at another all-time high. New highs were also posted by our a-d lines for Latin America and emerging markets.

Fundamentals: The Economic Cycle Research Institute’s US Weekly Economic Index is on a “sell” by our 1%x3 point-and-figure chart. Moreover, the monthly Coppock oscillator has a bearish bias even as the weekly indicator is positioned to peak near the end of the current quarter. The resulting pressures are expected to persist for months.

Interest Rates: The daily Coppock Curve is likely to peak within the next week. If so, this would imply that yields will come under renewed pressure. We expect that both the weekly...
By Walter Murphy on 2/16/2012 9:06 AM
On Wednesday, the S&P 500 posted its second straight decline – and third in four days – with a loss of 0.5%. Declining stocks exceeded winners by 2:1; the up/down volume ratio was bearish by a slightly smaller margin. Moreover, turnover increased by 5%. The daily Coppock Curve still has a bearish bias for 17 of the 24 S&P industry groups and for 18 of the 30 DJIA stocks.

We had previously pointed out that, based on our hourly closing data, the S&P has been trapped in a 1340-1354 range for eight sessions. Wednesday’s action expanded that range – by all of one point – before reversing back to the lower end of the range. Thus, there are no changes to our count. Moreover, key short term support remains at 1337.35. A decisive breakout could well signal further gains toward 1371.

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By Walter Murphy on 2/15/2012 9:56 AM
On Tuesday, the S&P 500 posted its second decline in three days with a loss of 0.1%. Declining stocks exceeded winners by 2:1; the up/down volume ratio was bearish by a similar margin. Moreover, turnover increased by 11%. The daily Coppock Curve still has a bearish bias for 13 of the 24 S&P industry groups and for 15 of the 30 DJIA stocks.

Today’s decline was enough to reverse the rally from Friday’s low on our .25%x3 hourly point-and-figure chart. Since we count that rally as a lower degree fifth wave, today’s decline satisfies the minimum requirements for a larger degree five-wave rally from the January 30 low at 1300. And, like a house of cards, the completion of that rally satisfies the minimum requirements for an even larger degree five-wave sequence from the December 19 low at 1202.

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By Walter Murphy on 2/13/2012 6:55 AM
Stocks: With the BPI, breadth, momentum and sentiment all in gear, it seems unlikely that the post-2009 rally – and arguably the post-October 2010 rally – has seen its final high. However, on a near to medium term basis, it is important to remember that these same indicators are overbought.

The Rest of the World: The global Bullish Percent Index is higher than any of the individual US sectors. This relative strength is further demonstrated by the fact that the All Country Index has been outperforming the S&P 500 for much of the year to date.

Interest Rates: The weekly (medium term) and monthly (long term) point-and-figure trends are down for yields. However the daily (short term) trend is up, and that may be a sign of things to come.

Commodities: We have been making the case that commodities as a group are engaged in an intermediate rally against a larger cyclical decline. We see no reason to change that view.

US Dollar: The combination of weekly momentum and overbought sentiment suggests...
By Walter Murphy on 2/9/2012 1:53 PM
On Wednesday, the S&P 500 posted its fifth gain in six days with a rally of 0.2%. Advancing stocks exceeded losers by 4:3 while the up/down volume ratio was bullish by better than 3:2. Moreover, turnover increased by 9%, which was enough to edge above its 21-dma. The daily Coppock Curve still has a bearish bias for 12 of the 24 S&P industry groups and for 16 of the 30 DJIA stocks.

As shown in the recent monthly, we are counting the rally from the mid December low as a five-wave pattern. The two counts we showed both treat the January 30 low as the completion of a fourth wave with the rally in the days since then viewed as a fifth wave. Thus, a decline back below 1300 would mark a reversal of some significance. We are not treating 1300 as tactical support (that designation is applied to the 2008-2012 support line), but it might be the next most important benchmark. So we will give the current rally the benefit of the doubt above 1300. A reversal through that level would erase that benefit and likely signal...
By Walter Murphy on 2/8/2012 5:26 PM
On Tuesday, the S&P 500 posted its fourth gain in five days with a rally of 0.2%. Advancing stocks edged out losers by 22 issues; the up/down volume ratio was bullish by a similarly narrow margin. However, turnover increased by 12%. The daily Coppock Curve still has a bearish bias for 12 of the 24 S&P industry groups and for 19 of the 30 DJIA stocks.

Over the last two days, the US dollar index confirmed the impulsive nature of the decline from its mid January high. Monday’s bounce effectively locked in the decline up to that point, then Tuesday’s decline broke down through support. Near term momentum is oversold, but could prove to be a confirming, “bad oversold” condition. At the same time, the weekly oscillator, which is in a hard down phase, is still overbought.

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By Walter Murphy on 2/6/2012 8:47 AM
Stocks: Recent strength has likely bought the market some time. Probabilities have increased that the post-2009 “D” wave is still in force.

The Rest of the World: The MSCI All Country Index is on the verge of decisively breaking out above its late October high. Yes, the index has traded above that benchmark in recent days, but more work is needed for a decisive breakout. If that occurs, old resistance at 305-319 will become new support.

Fundamentals: The monthly Coppock oscillator for the unemployment rate is in a downtrend, but is about as oversold as it gets. There are signs of stabilization in the oscillator, but no real signs of an imminent reversal. Such signs may not appear until the fourth quarter.

Yields: From an Elliott Wave perspective, the prospects for a meaningful intermediate rally in yields may be waning. However, the non-Elliott Wave evidence remains conducive to such a rally.

US Dollar: We think that recent weakness could be the opening salvo in an intermediate decline....
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