Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 3/27/2013 3:21 PM
We have regularly pointed out that, in recent years, the S&P 500 has had a positive correlation with 10-year yields, the euro, and many commodities. Indeed, we used those relationships as some of the evidence to anticipate intermediate trend changes both last summer and again near year end. More recently, we have been of the opinion that technical deterioration in these three asset classes would coincide with other evidence (momentum, cycles, and sentiment) to fuel an intermediate correction by the S&P from a March-April top.

However, in recent weeks, the historical correlations have been changing. Indeed, the correlation of the S&P with yields, the euro, and oil are at the lowest levels of the year. In fact, the S&P/euro correlation is now negative and the S&P/oil correlation is on the verge of becoming negative. On the surface, this suggests that we might put less emphasis on these inter-market relationships.

That said, these correlations went through a similar “hiccup” last summer and returned...
By Walter Murphy on 3/25/2013 2:53 PM
“Plain English”

US Equities: The daily Coppock Curve has a bearish bias while the weekly oscillator is likely to peak within the next three weeks. This momentum environment confirms the overbought sentiment implications and also indicates that the 20-week cycle is positioned to move into its bear phase.

Global Equities: Last Sunday was St. Patrick’s Day, so it is perhaps fitting that the Irish Stock Exchange Index (ISEQ) was one of the few indexes in our weekly survey to post a gain for the week. Indeed, only China had a better week. What is probably not appreciated that the ISEQ is now on a nine-week winning streak

Interest Rates: Both the daily and weekly Coppock Curves are peaking. These conditions suggest that the decline of recent days will prove to be the opening salvo in a larger intermediate downtrend. The intermediate pressures from the weekly Coppock oscillator will likely persist into May-June.

Commodities: Copper is at an important juncture. We have been counting the trading...
By Walter Murphy on 3/23/2013 10:49 AM
On Thursday, the S&P 500 recorded its fourth decline in five days. Moreover, the 0.8% setback was the largest of those four losses. Declining stocks exceeded winners by 13:4 while the up/down volume ratio was bearish by a slightly more modest margin. Turnover fell 4%. The daily Coppock Curve has a bearish bias for 22 of the 24 S&P industry groups and for 25 of the 30 DJIA stocks.

The MSCI World (ex US) Index lost 0.2%. The daily Coppock Curve has a bullish bias for 32 of the 35 non-US markets in our regular survey. From our perspective, the World Index has some nominal trend and Elliott Wave similarities with the S&P 500. However, there are some glaring relative strength differences.

For example, while the “500” is severely challenging it 2007 highs, the World Index is well short of that benchmark. Indeed, in 2011, that index only briefly challenged a 61.8% retracement of the 2007-2009 bear market and, more recently, its 2012-2013 rally has been unable to return to the 2011 high. Now, bearish intermediate...
By Walter Murphy on 3/21/2013 3:41 PM
The S&P 500 rallied 0.7% on Wednesday, breaking a three-day losing streak. Advancing stocks exceeded losers by 7:2 while the up/down volume ratio was bullish by a slightly more modest margin. The rally was mitigated a bit by an 11% decrease in turnover. The daily Coppock Curve has a bearish bias for 19 of the 24 S&P industry groups and for 23 of the 30 DJIA stocks.

In yesterday’s blog, we suggested that, while the evidence for an intermediate correction was building, our sense was that such a correction would be more volatile than the previous intermediate decline in October-November. That said, there is no conclusive evidence to suggest that Wednesday’s rally is a renewal of the post-November uptrend. Indeed, to some degree, the evidence is conflicting. For example, the DJIA recorded a new high, postponing confirmation that the 20-week cycle has finally peaked even as the number of stocks in that index that have a bearish daily Coppock Curve actually increased on Wednesday.

As is it, the daily oscillator...
By Walter Murphy on 3/21/2013 7:36 AM
On Tuesday, the S&P 500 recorded its third straight decline with a loss of 0.2%. This is its longest losing streak of the year. Declining stocks exceeded winners by 3:2 while the up/down volume ratio was bearish by a more robust 8:5 margin. These pressures were compounded by a 19% increase in turnover. The daily Coppock Curve has a bearish bias for 22 of the 24 S&P industry groups and for 22 of the 30 DJIA stocks.

The MSCI World (ex US) Index fell by 0.3%. The daily Coppock Curve has a bearish bias for 25 of the 35 non-US markets in our regular survey.

The evidence continues to mount that the US stock market is embarking on an intermediate decline. As noted, the daily Coppock Curve has a bearish bias for a majority of the S&P 500’s industry groups and for most global markets. Moreover, a solid majority of the oscillators are overbought, allowing us to generally describe the near term condition as “overbought and deteriorating.”

From a larger intermediate perspective, the 20-week cycle is peaking...
By Walter Murphy on 3/19/2013 5:59 PM
“Plain English”

US Equities: The recent breakout through 1551 is bolstered by the fact that the NYSE daily cumulative advance-decline line is at an all-time high, all 10 sector SPDRs are on a point-and-figure “buy,” and the eight-week RSI is at confirming “good overbought” readings for seven of the 10 SPDRs. All of this suggests that higher highs are still to come, intervening corrections along the way notwithstanding.

Global Equities: Although the recent bull market highs in the US have been well-publicized, neither the World Index nor 17 of the 37 markets in our survey finished the week at their own 52-week high. Meanwhile, the index’s weekly oscillator is overbought and deteriorating.

Interest Rates: The daily Coppock Curve is positioned to take on a bearish bias by the end of this month and the weekly oscillator appears to have already reversed into a downtrend. Thus, a short term peak in coming days should confirm the onset of an intermediate decline.

Commodities: The equal-weighted...
By Walter Murphy on 3/14/2013 3:41 PM
On Wednesday, the S&P 500 rallied 0.1% for its eighth gain in nine sessions. Advancing stocks exceeded losers by a bit less than 8:5 while the up/down volume ratio was bullish by a more modest 7:6 margin. Turnover fell by 4.0% and is below its 21-day ma. The daily Coppock Curve has a bullish bias for 22 of the 24 S&P industry groups and for 25 of the 30 DJIA stocks.

The MSCI World (ex US) Index lost 0.6%. The daily Coppock Curve has a bullish bias for 30 of the 35 non-US markets in our regular survey.

Our inclination is to count the rally from yesterday’s low as the fifth wave of the fifth wave from November’s low. This “inclination” is based on the fact that this count is clearer in other indexes such as the DJIA or the NASDAQ or S&P’s small cap index. However, the recent backing and filling in the S&P 500 makes us alert to the possibility that this index is still only in 3-of-5 from November’s low.

Regardless, more objective measures of the market suggest that the post-November rally is...
By Walter Murphy on 3/11/2013 4:06 PM
US Equities: While the media has been all agog about the fact that the DJIA has been recording all-time highs, for us the more important event was the S&P 500’s rally through 1551. As we noted on many occasions, such a breakout means that the cyclical uptrend from the 2011 low is positioned to extend in both price and time. Not surprisingly, we have been asked whether our long term/secular counts have changed. The short answer is “no.”

Global Equities: Although the recent bull market highs in the US have been well-publicized, neither the World Index nor 17 of the 37 markets in our survey finished the week at their own 52-week high. Meanwhile, the index’s weekly oscillator is overbought and deteriorating.

Interest Rates: We view last week’s rally as a “second leg” in the uptrend from the double-bottom recorded last November-December. As such this new rally should be a Fibonacci multiple of the recently completed November-February rally.

Commodities: Gold is at risk of resuming its downtrend...
By Walter Murphy on 3/7/2013 6:13 PM
On Wednesday, the S&P 500 eked out its fourth straight gain (and six out of seven) with a rally of 0.1%. Advancing stocks exceeded losers by a bit more than 5:4 while the up/down volume ratio was bullish by a more robust 9:4 margin. Turnover increased by 2.0% but edged above its 21-day ma. The daily Coppock Curve has a bullish bias for 19 of the 24 S&P industry groups and for 22 of the 30 DJIA stocks.

The MSCI World (ex US) Index rallied by 0.2%. The daily Coppock Curve has a bullish bias for 25 of the 35 non-US markets in our regular survey.

Irony of ironies. The major averages are recording new bull market highs and the Dow Jones Industrials index is at an all-time high virtually four years to the day after the “financial crisis” lows in March 2009. As a result of the new highs, the two most popular e-mail questions we received were: 1) “Is this still a secular bear market rally?” and 2) How much higher can this rally go?” The short answers are: 1) “Yes” and 2) “I don’t know.”

The rationale...
By Walter Murphy on 3/5/2013 7:41 AM
“Plain English”

US Equities: The S&P has tended to be highly correlated with 10-year yields, the euro, and many commodities (especially oil). Since the weekly Coppock Curves for the other asset classes already have a bearish bias, a coming intermediate correction is likely to be a broad-based asset class event.

The Rest of the World: There has been notable momentum deterioration. At the beginning of February, the weekly Coppock Curve was constructive for a majority of the 37 markets. At the end of the month, the majority had a bearish bias. These new intermediate pressures could persist until late in the second quarter.

Yields: The weakness over the past month locked in the rally from November’s low (but not the larger post-July uptrend) as a complete pattern. At the same time, the weekly Coppock Curve has taken on a bearish bias (but not the monthly oscillator). This combination suggests that yields are embarking on an intermediate decline within a still developing cyclical uptrend.

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