Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 12/23/2010 11:49 AM
This is our final comment of the year.  We are off to celebrate another Christmas with children – and a first with a charming granddaughter.  In early January we will kick off with our thoughts on the prospects for 2011.  We hope that, in this season of joy and celebration, you are in the company of family and friends and have a happy and healthy New Year.

On Wednesday, the S&P 500 posted its 11th gain in 12 days with a rally of 0.3%.  Advancing stocks outpaced losers by a bit less than 3:2 while the up/down volume ratio was positive by a more modest 5:4.  Total volume increased by less than 1%, but has been below four billion shares for three straight days.  The daily Coppock Curve has a bearish bias for 20 of the 24 S&P industry groups and for 19 of the 30 stocks in the DJIA.

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By Walter Murphy on 12/22/2010 5:43 PM
On Tuesday, the S&P 500 posted its 10th gain in 11 days with a rally of 0.6%.  Advancing stocks outpaced losers by a 10:3 margin while the up/down volume ratio was positive by a more robust 13:3.  Total volume, which has now been below four billion shares for two straight days, fell by 2%.  The daily Coppock Curve has a bearish bias for 16 of the 24 S&P industry groups and for 19 of the 30 stocks in the DJIA.

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We have frequently referred to 1173 as tactical support.  However, in our recent STR, we pointed to 1233-1232 as intervening support and suggested that a violation of that range would complete a week-long top formation.  The importance of...
By Walter Murphy on 12/17/2010 5:15 PM

The link below is to an interview I did today on Canada’s Business News Network.

http://watch.bnn.ca/#clip390409

 

By Walter Murphy on 12/16/2010 10:45 PM
On Wednesday, the S&P 500 broke a six-day winning streak with a loss of 0.5%.  Declining stocks outpaced winners by a 13:5 margin while the up/down volume ratio was negative by almost 3:1.  These pressures were exacerbated by a 10% increase in total volume.  Nonetheless, the daily Coppock Curve still has a bullish bias for 15 of the 24 S&P industry groups and for 16 of the 30 stocks in the DJIA.

There is not much to add to recent comments on the stock market.  The rally has carried through – and is still above – a 61.8% retracement of the 2007-2009 decline.  But his does not eliminate the fact that momentum is overbought and increasingly at risk of a downside reversal even as sentiment indicators reflect traders’ excessively optimistic view of the market.  We often say that our most important tools are a pencil and a ruler and, in that spirit, it is important to note that the S&P has violated an uptrend line that has been in effect since November 30 on the hourly chart.  This suggests that the index is...
By Walter Murphy on 12/15/2010 8:11 PM
On Tuesday, the S&P 500 recorded its sixth gain in a row with a rally of 0.09%; among the six consecutive up days, this was the third with a gain of less than 0.1%.  The up/down volume ratio was positive by 7:5 while advancing stocks edged out losers by a modest 21:20 margin.  Total volume declined by 7%.  The daily Coppock Curve still has a bullish bias for 19 of the 24 S&P industry groups and for 21 of the 30 stocks in the DJIA.

In today’s “Breakfast with Dave,” friend and former colleague Dave Rosenberg presented a chart of the Shiller P/E 10 ratio.  Dave observed that, based on this indicator, the market is overvalued by 33%.  We are not the biggest fans of P/E ratios, but the price/dividend ratio (of which we are fans) shows similar extremes.  Regardless, this fits in with our observations (most recently in this week’s STR) that both momentum and sentiment are overbought.

Real S&P with Household Financial Assets as a Percent of Total Assets

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By Walter Murphy on 12/10/2010 2:39 PM
On Thursday, the S&P 500 recorded its sixth gain in seven days with a rally of 0.4%.  The up/down volume ratio was positive by a bit more than 3:1 while advancing stocks outpaced losers by a 3:2 margin.  Total volume declined by 5%.  The daily Coppock Curve still has a bullish bias for all 24 S&P industry groups and for 20 of the 30 stocks in the DJIA.

About a week ago we made the observation that, while the daily Coppock Curve had bottomed, its bullish bias had the potential to be shorter than normal.  We thought 2-3 weeks was a reasonable estimate.  That is still our view.  At this juncture, the oscillator is constructive for all 24 S&P industry sectors.  That has been the case for five of the last six days.  However, six days ago, 16 of the groups were on the oversold side neutral; today, 21 of the 24 are overbought.  To us, this suggests that the oscillator could turn down for both a majority of the groups and for the “500” itself over the course of the next 5-8 days.

From our perspective, Wednesday’s...
By Walter Murphy on 12/9/2010 4:19 PM
On Wednesday, the S&P 500 recorded its fifth gain in six days with a rally of 0.4%.  The up/down volume ratio was positive by a bit less than 2;1, but declining stocks outpaced gainers by a 5:4 margin.  Total volume declined by 36%.  The daily Coppock Curve still has a bullish bias for all 24 S&P industry groups and for 21 of the 30 stocks in the DJIA.

Over the past two days, 10-year yields have gained almost 30 basis points, which makes it the best two-day rally since June 2009.  This surge has carried the rally slightly above a 50% retracement of the April-October decline and into an area of important chart resistance in the 3.16%-3.38% range.  As most readers are probably aware, we anticipated that a yield rally would be a broad-based global event.  That has proven to be the case; yields in all of the six non-US markets that we monitor are up sharply from October’s low.  Since there are no apparent signs of momentum deterioration in any of these markets or in the US, the rally in US 10-year yields in...
By Walter Murphy on 12/8/2010 6:12 PM
On Tuesday, the S&P 500 recorded its high for the day after three minutes of trading (up 1.0%) and then spent the rest of the session on the defensive to finish near the day’s low for a modest (0.05%) gain.  Breadth was positive by a bit more than 6:5, while the up/down volume ratio was positive by a more robust 7:3.  Total volume was almost double that of Monday’s turnover.  The daily Coppock Curve has a bullish bias for all 24 S&P industry groups and for 23 of the 30 stocks in the DJIA.

For those who may wonder, almost half of Tuesday’s seven billion share turnover came from Citigroup, which rallied 3.8%.  There are any number of reasons for this dominance, and some suggest that the stock’s volume should be eliminated or excused when viewing volume indicators.  We do not agree.  Our volume indicators will take things on face value.

The market’s initial strength was based on several supposedly bullish news items but, as we often suggest, the market makes the news, not vice versa.  In the end, Tuesday...
By Walter Murphy on 12/2/2010 1:26 PM
On Wednesday, the S&P 500 reversed its losing streak with a 90% up-day.  The day’s 2.2% gain was the best performance since the lift-off from the late-August low.   Breadth was positive by better than 9:1, while the up/down volume ratio was positive by a more robust 15:1.  The result was the first 90% up-day since October 5.  By contrast, total volume – which fell 7% – can be viewed as a disappointment.  The daily Coppock Curve now has a bullish bias for 20 of the 24 S&P industry groups and for 17 of the 30 stocks in the DJIA.

In Monday’s post, we mentioned that, even though there was fairly clear evidence of medium term deterioration, the short term daily Coppock Curve was oversold and positioned to bottom this week.  Thus, we were (and are) inclined to wait for the next short term peak before anticipating the full force of an intermediate decline.  We will, therefore, take today’s rally in that context.  We view it as the beginning of a short term advance within an intermediate topping process.  Short...
By Walter Murphy on 11/30/2010 4:05 PM
On Monday, the S&P 500 lost ground for the fourth time in five days with a decline of 0.1%.  Breadth was negative by a bit more than 5:4, but the up/down volume ratio was positive by about 7:6.  Total volume was more than double Friday’s half session.  The daily Coppock Curve has a bearish bias for 22 of the 24 S&P industry groups and for 22 of the 30 stocks in the DJIA.

On the one hand, Monday’s early weakness was not enough to break 1177-1173 support mentioned in yesterday’s post.  On the other hand, it was enough to finally, if only temporarily, break the hourly point-and-figure uptrend line from the late August low.  Above all of this is the fact that the weekly Coppock Curve is increasingly fatigued.  As mentioned in yesterday’s post, this important oscillator turned down for seven of the 10 sectors.  However, the daily Coppock guide is oversold and positioned to bottom later this week.  So we probably need to show some patience and wait for the next short term peak before anticipating the full force...
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