Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 3/21/2016 6:20 PM
US Equities: In previous comments we noted the unhealthy situation where the big cap stocks (the generals) were leading the smaller cap stocks (the troops) during last year’s rally. More recently we noted that, by some measures, this disparity had grown to historic proportions. This week’s data shows that the generals are still out in front. This highlights another concern. During virtually the entire 2009-2015 uptrend the very broad NASDAQ Composite continually outperformed the very narrow DJIA. However, since last September the NASDAQ has underperformed the DJIA by the greatest margin since the 2009 low. Moreover, there has been virtually no relative recovery since the market’s February low. This indicates that the leadership of the market has changed in an unhealthy way.

Global Equities: Developed markets have been lagging their developing market cousins. This is currently being evidenced by the fact that countries such as Brazil and Russia are showing relative strength. As a result, the MSCI Emerging...
By Walter Murphy on 2/29/2016 3:32 PM
Last week the S&P 500 large cap index gained 1.58%, the S&P 400 midcap index rallied 2.65%, and the S&P 600 smallcap index added 2.76%. As a result, the broad S&P 1500 advanced 1.69%. The “400” and “600” have now had their best two-week rally since October 2014 while the “500” had its strongest two week run since February 2015.

Nonetheless, the “500” is still 8.57% below its 52-week closing high even as the “400” and “600” are 13.50% and 14.11% below their respective 52-week benchmarks. Conventional wisdom has it that the latter two indexes are in “correction territory” while the “500” has rallied out of “correction territory.”

Unfortunately those numbers and labels hardly describe the damage that has been done and likely still needs to be repaired.

A review of the individual stocks in these indexes reveals much larger declines. Most readers are probably aware that we are big fans of the daily cumulative advance-decline line. It is essentially an unweighted index where an up or down day counts...
By Walter Murphy on 2/22/2016 4:57 PM
“Plain English”

US Equities: In October of last year, the difference between the Bullish Percent Index for the DJIA and the BPI for the NYSE Composite reached its highest spread in the 15 years of data at our disposal. While the spread has narrowed since October, it remains near historic highs. This suggests that the generals are further out in front of the troops than they were in 2007 or 2001.

Global Equities: Intermediate pressures are easing. The weekly Coppock Curve has bottomed for developing markets and we expect it to do the same for developed markets very soon. The resulting intermediate bullish bias should persist into May.

Rates: The weekly Coppock Curves for both US 10- and 30-year yields have a bearish bias but they are positioned to begin bottoming in April. Much the same can be said for yields in a majority of the six countries in our global index.

Commodities: Copper’s weekly Coppock oscillator is in an uptrend and has the potential to remain constructive into April....
By Walter Murphy on 2/16/2016 3:26 PM
“Plain English”

US Equities: The market appears increasingly ready to rally for more than a few days. We say this because there are already a number of bullish divergences. For example, despite repeated attempts, the DJIA has yet to pierce its August low on either a closing or intra-day basis even though most other indexes have done so. Daily Coppock Curves and RSIs for most indexes were noticeably higher last week than they were in January or last August. It is also important to note that the 60-day high-low ratio developed by the late Martin Zweig indicates that only seven other markets since 1982 were more oversold than the current decline.

Global Equities: In recent weeks, increased concern has been paid to European banks. That concern appears warranted. Last week the STOXX Europe 600 Bank Index hit a low (at 130.48) that represents more than a 42% decline just from its 52-week high. In recent years, the index was never able to retrace as much as 38.2% of its 2007-2009 bear market and now the...
By Walter Murphy on 2/8/2016 4:27 PM
“Plain English”

US Equities: The NYSE a-d line has not made a new high in 41 weeks. In addition, the NASDAQ has broken down to a 52-week low. The equal-weighted Value Line Geometric Index has already decline by almost 28% from last April’s high and has decisively penetrated its 2009-2015 uptrend line. All of this has occurred even as the S&P (and the DJIA) is still only in the early stages of its primary {E}-wave downtrend.

Global Equities: In recent weeks, most of the attention has been on China. Indeed, the Shanghai Composite finished last week 46.5% below its 52-week high. However, this focus hides the fact that European markets may be facing potentially significant damage of their own in the months ahead.

Interest Rates: Last week US 10-year yields dipped to levels not seen in a year. As a result, they recorded a lower low on their monthly chart for the first time since January 2015. In so doing, the entire rally from the January 2015 low has been locked in as a complete pattern. Given...
By Walter Murphy on 2/2/2016 4:06 PM
“Plain English”

US Equities: Elliott Wave patterns tend to alternate in complexity. The 2000-2002 primary {A}-wave decline was complex with numerous overlaps in its structure. By contrast, the 2007-2009 primary {C}-wave downtrend was fairly straight-forward. To clarify the difference, the 2000-2002 decline had 13 inflection points in its monthly chart while the 2007-2009 downtrend only had seven. Given the tendency toward alternation, we will expect this post-2015 decline to be closer to the 2000-2002 pattern than to 2007-2009. Thus, if the current {E}-wave decline proves to be composed of two separate ABC downtrends in a manner similar to the 2000-2002 pattern, then we can make a case that the S&P is still in the relatively early stages of the initial ABC. Specifically, it is not a stretch to label January’s 1812 low as “a of minor A of intermediate (A) of primary {E}.”

Sectors: Utilities and Consumer Staples are showing the best relative strength. The materials sector is showing the weakest relative...
By Walter Murphy on 1/25/2016 5:03 PM
“Plain English”

US Equities: In last week’s comment we noted that, while we would not be surprised to see the S&P’s daily Coppock Curve bottom in a matter of days, the deteriorating weekly oscillator should be able to shrug off any resulting near term strength. The daily indicator did bottom last week and did so after making a confirming 52-week low. Indeed, the daily oscillators for the DJIA and NASDAQ also hit 52-week lows. However, the weekly Coppock remains positioned to stay under pressure into March. The bottom line is that, even with this oversold rally, the weekly, monthly, and quarterly oscillators will remain weak.

Global Equities: Earlier this month the MSCI All Country World (ex US) Index came within about 5% of its 2011 reaction low of 203.37. Although the index has already violated its post-2009 support trend line, a break of 203 will effectively lock in the 2009-2014(5) rally as an Elliott Wave three-wave structure. Such a development would confirm the post-2009 uptrend as a bear market...
By Walter Murphy on 1/20/2016 4:17 PM
“Plain English”

US Equities: Last week’s intra-day breach of 1867 by the S&P was a significant development. But there is some unfinished business. Neither the DJIA nor the NASDAQ has violated their August low on an intra-day basis, although the latter did so on a closing basis. (For the record, we are watching 15370 on the DJIA.) While we typically use intra-day values for support, resistance, and Fibonacci calculations, most traditional technical indicators are based on closing data. So it is important that the S&P follow up its tactical intra-day breakdown with a close below 1867; the lowest daily closing low last week was 1880.

Global Equities: Our long-standing count is that China’s Shanghai Composite has been tracing out a large degree ABC correction since 2007. Within that count, this past June’s high completed the primary {B}-wave rally. The decline since then is the {C}-wave; as such it should have a Fibonacci relationship to the 2007-2008 {A}-wave. So it appears that, despite the damage...
By Walter Murphy on 1/8/2016 3:31 PM
On Thursday, the S&P 500 fell 2.37%, the DJIA lost 2.32 %, and the NASDAQ declined by 3.03%. NYSE declining stocks exceeded winners by almost 10:1 while the up/down volume ratio was bearish by less than 8:1.

The last time we wrote a blog (December 19) we concluded by suggesting that in early 2016, the market could be in its most fragile condition since 2007. Whether that proves to be true or not remains to be seen. But the opening fireworks are not promising. Many commentators have pointed out that this is the worst four-day start to a year in the DJIA’s history. In addition, the S&P 1500 finished today with 1206 (80.4%) of its components at least 10% below their 52-week high; half (749) of the components have declined by at least 20%. Meanwhile, the S&P 600 (small cap) index has already hit a 63-week low, which makes us think that its 2009-2015 bull market may be in the history books. Finally – and not to be outdone – the MSCI All-Country (ex US) Index fell to a 40-month low today. So it appears that neither...
By Walter Murphy on 1/5/2016 5:19 PM
“Plain English”

US Equities: 2016 may well mark the end of the post-2009 “bull market.” A break of 1867 will raise a red flag as to the health of the uptrend. It is important to note that such a break will also violate the dominant 2009-2015(6) support trend line. So 1867 can be considered tactical support from the perspective of both price and trend.

The Rest of the World: During 2015, the S&P 500 achieved all-time highs relative to the MSCI World (ex US) index and posted its fifth year-over-year relative increase in six years. However, these highs were not confirmed by either the relative weekly or monthly Coppock Curve. Moreover, the weekly oscillator is peaking and the monthly indicator is already in a downtrend. The risk, therefore, is that the S&P will show some relative weakness in 2016 and might even do some damage to the post-2012 relative uptrend.

Yields: The monthly Coppock oscillator has a bullish bias for US 10-and 30-year yields, confirming the end of the previous multi-month...
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