Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 5/29/2014 10:15 AM
On Wednesday the S&P 500 broke a four-day winning streak with a loss of 0.1%; the DJIA had a larger 0.3% loss. Declining stocks exceeded winners by 7:5; the up/down volume ratio was bearish by a more modest 15:14 margin. Turnover was little changed. The daily Coppock Curve still has a bullish bias for 14 of the S&P’s 24 industry groups but has a bearish bias for 17 of 30 DJIA stocks.

We have regularly pointed out that there has historically been an inter-market relationship between the S&P, yields, the euro, and select commodities. With that in mind, it seems important to note that 10-year yields, the euro, and gold have all recently broken down through important support trend lines. These breakdowns, along with price counts and weak momentum, suggest that lower lows are likely for these assets.

Nonetheless, and despite these inter-market pressures, the S&P has continued higher to all-time highs.

So the question is: Who missed the message? Was it the “500” or the other three asset classes?...
By Walter Murphy on 5/27/2014 1:21 PM
“Plain English”

US Equities: The long term support line for the S&P begins at the 2011 lows. The daily version of this line will be in the 1821-1825 range this week. For our purposes, the related resistance line is more important. This line, which can be traced back to at least early 2011, and arguably to early 2010, is cutting through 1921-1922. This range is important because, in previous comments, we have suggested that any rally that fails to break 1915-1920 resistance (based on Fibonacci and measured moves) would be “disappointing.”

Global Equities: We have been making the case that momentum pressures will begin to become more obvious in late May or June and that still seems to be a reasonable expectation. This will be all the more likely if the Dow Jones (ex US) Index fails to rally decisively through 244-247 in the weeks ahead.

Interest Rates: In our 2014 Year Ahead, we noted that the yield rally from the 2012 low was in its later stages and that the subsequent decline would be viewed...
By Walter Murphy on 5/22/2014 3:59 PM
The S&P 500 posted its third gain in four sessions on Wednesday with a rally of 0.8%; the DJIA had a larger 1.0% gain. Advancing stocks exceeded losers by 5:2; the up/down volume ratio was bullish by a slightly larger margin. Turnover fell for the eighth time in 10 sessions. The daily Coppock Curve has a bullish bias for 13 of the S&P’s 24 industry groups and for 15 of 30 DJIA stocks.

On Wednesday Investors Intelligence (II) released their weekly Advisors Sentiment poll. We were struck by three things bulls are at their highest level since January, bears remain below 20%, and the difference between the two (38.9%) is close to what II calls the danger zone, signaling “elevated risk.”

We have been monitoring the II data for many years and respect the danger zone. However, these numbers, like any sentiment reading, are more of a conditional indicator than a timing tool. As a result, we are more interested in the trend of the bull-bear spread than its absolute level. An examination of the nearby chart...
By Walter Murphy on 5/19/2014 4:35 PM
“Plain English”

US Equities: As noted in earlier comments, at least one-third of the stocks in the S&P 600 have decline by more than 20% below their 52-week high. Similarly, the index’s Bullish Percent Index is at its lowest level since October 2011 – but is still not in oversold territory. This, plus the fact that both the weekly and monthly Coppock Curves for the “600” have a bearish bias, suggests lower lows, intervening oversold rallies notwithstanding.

Global Equities: Our regional cumulative advance-decline lines have recently made all-time highs in North America, Europe, and the Pac Rim. Although the a-d laggard, Latin America, is some distance from its all-time high, it is at a 52-week high.

Interest Rates: Ten-year yields decisively broke down from a trading range that had been in force since early February. On the surface, this allows for a measured move to 2.36%-2.35%. However, for some time we have been pointing to 2.47-2.45% as an important band of support and, despite the breakdown,...
By Walter Murphy on 5/15/2014 11:02 AM
On Wednesday, the S&P 500 broke a three-day winning streak with a loss of 0.5%; the DJIA had a larger 0.6% loss. Declining stocks exceeded winners by better than 3:1 while the up/down volume ratio was bearish by a more modest 2:1 margin. Turnover has declined for five straight sessions. The daily Coppock Curve has a bearish bias for 19 of the S&P’s 24 industry groups and for 21 of 30 DJIA stocks.

In recent months we have regularly pointed out that a number of markets were engaged in a trading range or in a well-contained channel. Two of the more important markets are 10-year yields and the euro, both of which have historically strong correlations with the S&P. In recent days, both have pierced long-standing support trend lines.

Ten-year yields have broken down from a trading range that had been in force since February – and did so with an emphatic downside gap on Wednesday. The euro’s breach has not been as decisive, but the fact is that it is now below its support line for only the second time since...
By Walter Murphy on 5/14/2014 1:25 PM
“Plain English”

US Equities: Price, momentum, time, and sentiment continue to suggest that, while the S&P’s underlying uptrend remains intact, it is increasingly fragile.

Global Equities: The weekly Coppock Curve has had a bullish bias for 12 of the past 13 weeks for a majority of the 37 markets in our regular weekly survey. Previously, we pointed to a possible late April or early May majority bearish condition, but it appears that the pressures will begin to become more obvious in late May or early June.

Interest Rates: The 2.58%-2.82% trading range that 10-year yields have been in since January bent but did not break. Thus, both the range and the lower –more important 2.47%-2.45% support band – remains intact.

Commodities: Gold has recently been weak and the weekly Coppock Curve is overbought and deteriorating. However, the monthly oscillator is oversold and improving. This combination indicates that current weakness is a late-stage event and that an early summer low will benefit...
By Walter Murphy on 5/5/2014 3:16 PM
“Plain English”

US Equities: While the larger post-2000 trading range is not yet complete and seems to need one more ABC down-leg (similar to 2000-2002 and 2007-2009), the current rally from the 2009 low also has some unfinished business (to the upside).

The Rest of the World: The S&P 500 appears positioned to come under increased pressure in both absolute terms and relative to most other markets. This process is in the early stages of development as the monthly Coppock for the S&P/World relative is only now taking on a bearish bias and the resulting pressures are positioned to persist into at least late 2014 and arguably into 2015. Anticipated S&P relative weakness is expected to be particularly evident against the larger markets.

Yields: The potential for a sustainable 10-year yield decline is bolstered by US 30- and five-year yields, as well as global 10-year yields. In the US, 30-year yields are in a downtrend and five-year yields are testing – and on the verge of reversing – a seven-month...
By Walter Murphy on 5/1/2014 12:32 PM
On Wednesday, the S&P 500 recorded its third straight gain with a rally of 0.3%. The DJIA rallied 0.3% and closed at an all-time high. Advancing stocks exceeded losers by 2:1 but the up/down volume ratio was bullish by a more modest 8:5 margin. Turnover increased by 3%. The daily Coppock Curve has a bullish bias for 22 of the 24 S&P industry groups and for 21 of 30 DJIA stocks.

Much is being made of the fact that the DJIA made a new closing high today, finally breaking the previous benchmark set on December 31. Among the indexes, this new high is a lone wolf. Neither the S&P 500 nor the NASDAQ (which lost ground in April) confirmed the DJIA’s performance. In addition, the NYSE Bullish Percent Index actually fell for the day and is still well below previous highs. In short, there are multiple bearish divergences. Moreover, the generals are leading the troops, which is not a good thing. The late great Joe Granville used to use similar conditions as a sign that the market was in a fragile condition.

...
By Walter Murphy on 4/28/2014 4:56 PM
US Equities: Although the daily chart suggests that it is possible to count the S&P’s February-April rally as a trending impulse wave, its weekly chart indicates that a counter-trend pattern is the better interpretation. The DJIA supports this view; its February-April rally is corrective in both the daily and weekly charts. This is important, because April’s decline locked in the February-April rally as a complete pattern for both indexes.

Global Equities: The Dow Jones Global (ex US) Index’s June-October rally can easily be counted as a five-wave pattern, but the current uptrend from February’s low cannot be. This suggests that recent strength is a “C”-wave in the form of a bearish wedge (i.e., a diagonal triangle).

Interest Rates: The weekly Coppock Curve has bottomed for 10-year yields and is bottoming for a majority of the components in our six-country 10-year global index. This combination suggests that any breakdown in US 10-year yields in the weeks immediately ahead will not be decisive. In...
By Walter Murphy on 4/25/2014 3:44 PM
On Thursday, the S&P 500 recorded its seventh gain in eight days with a rally of 0.2%. However, declining stocks exceeded winners by 9:8; the up/down volume ratio was also bearish by a small margin. Meanwhile, the daily Coppock Curve has a bullish bias for 19 of the 24 S&P industry groups and for 18 of 30 DJIA stocks.

Globally, the Dow Jones Global (ex US) Index rallied by less than 0.1%. Internally, 17 of the 34 open markets in our 35-market non-US universe were higher and 17 retreated. The daily Coppock Curve has a bearish bias for 18 of the 35 markets.

There are trading ranges to the right of us and trading rangers to the left of us. The S&P 500 has spent most of its time since late February contained in an 1840-1890 range. Ten-year yields have been in a 2.58%-2.82% range since early February. The US dollar index has spent most of its time since October trading between 79.60 and 81.50. And gold may be engaged in its fourth round trip between 1210 and 1383 since mid-2013.

By definition,...
Market Pulse
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