Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 5/25/2011 4:06 PM
On Tuesday, the S&P 500 posted its third straight decline (and sixth in eight days) with a loss of less than 0.1%.  Declining stocks exceeded gainers by 4:3 while the up/down volume ratio was positive by a 9:8 margin.  Total volume fell by 5% and remains below its 21-day ma.  The daily Coppock Curve has a bearish bias for 22 of the 24 S&P industry groups and for 27 of the 30 stocks in the DJIA.

We are not a big fan of using the 50-day ma as an indicator for one stock or index.  However, we do keep an eye on the 50-day ma for groups of stocks within a sector or index.  Therefore, we note with more than passing interest that more than half of the stocks within the NYSE Composite have broken down through their respective averages.  That adds some significance to the fact that the S&P (and the NYA) have closed below its August-May uptrend line.

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By Walter Murphy on 5/23/2011 5:44 PM
Stocks: There really is not much good to say about the rally from the mid-March low. It is clearly a corrective (i.e., counter trend) Elliott Wave structure. The May 2 high was not confirmed by many indicators including, as mentioned in recent comments, on-balance volume and the Bullish Percent Index. Sentiment has been – and still is – overbought. The weekly Coppock Curve has a bearish bias for most of the 24 S&P industry groups (as well as for the unweighted S&P 500). And, finally, last week the index violated the support trend line from the March lows.

The Rest of the World: A case can be made that the relative strength pattern is now in its Elliott Wave fifth wave down from the April top. If so, that would mean that the post-April decline is likely the first leg of a larger downtrend. In turn, that would mean that smaller countries will soon be positioned for what could be a fairly long period of relative underperformance.

10-Year Yields and the Long Bond: In our last STR, we said that we were...
By Walter Murphy on 5/19/2011 3:39 PM
On Wednesday, the S&P 500 rallied 0.9%, breaking a three-day losing streak.  Advancing stocks exceeded losers by better than 11:2 while the up/down volume ratio was positive by a more modest 10:3 margin.  However, total volume fell by 12% and pulled back from its declining 21-day ma.  The daily Coppock Curve has a bearish bias for 22 of the 24 S&P industry groups and for 25 of the 30 stocks in the DJIA.

In yesterday’s comment we said that the depth of the decline from the May 2 high probably ruled out the possibility that that the post-March pattern was an Elliott Wave diagonal triangle.  The key word is “probably.”  We came to that conclusion based on two factors: 1) the post-March uptrend line has been violated and 2) the decline from May 2 retraced a bit more that 61.8% of the 4/18-5/2 rally.  Both of those are a bit too much for the typical diagonal.  By the same token, even if the diagonal count is still valid, the deep pullback of recent days likely means that a final rally will be reasonably weak. ...
By Walter Murphy on 5/18/2011 4:11 PM
On Tuesday, the S&P 500 fell by less than 0.1%, but this was enough to post the index’s third straight decline (and fourth loss in five sessions).  Declining stocks exceeded winners by better than 3:2 while the up/down volume ratio was negative by a more modest 8:7.  Total volume increased by 14% and is now challenging its 21-day ma.  The daily Coppock Curve has a bearish bias for 21 of the 24 S&P industry groups and for 24 of the 30 stocks in the DJIA.

The index has decisively broken below its post-March uptrend line – and has done so on increased volume.  Moreover, the Bullish Percent Index (BPI) for the “500” has turned down.  Perhaps more importantly, the BPI for the broader S&P 1500 and NYSE Composite indexes is already below the respective March lows.  These developments, plus deteriorating momentum, overbought sentiment, and what appears to be a new bearish bias for the 20-week cycle, suggests that the post-March rally has been reversed.  In addition, we remind readers that, in the recent STR, we...
By Walter Murphy on 5/16/2011 10:54 AM
 

Below are the “Plain English” summary points from our most recent Short Term Review. 

For subscription information for the full report, please e-mail customerservice@wminsights.com.

Stocks: Structure, volume, momentum, sentiment, and time are not indicative of a healthy market. However, price is the final arbiter and, despite these negatives, the trend is still up.

The Rest of the World: The uptrend in the relative strength pattern for emerging markets versus developed markets is still nominally intact, despite an apparent January-April double-top. If relative momentum in favor of the smaller markets begins to fail, the 2008-2011 relative uptrend could be under increased risk of a bearish reversal.

10-Year Yields and the Long Bond: We are inclined to give the downtrend in yields some leeway for several reasons. For example, even though short term momentum is oversold, the weekly Coppock Curve is still weak and is positioned...
By Walter Murphy on 5/11/2011 3:57 PM
On Tuesday, the S&P 500 posted its third consecutive gain with a rally of 0.8%.  Advancing stocks exceeded winners by almost 6:1 while the up/down volume ratio was positive by a more modest 7:2 margin. Total volume was 14% higher than Monday’s turnover, but remains well below its 21-day ma.  The daily Coppock Curve has a bullish bias for 15 of the 24 S&P industry groups and for 21 of the 30 stocks in the DJIA.

The LA Lakers were swept out of the playoffs and my Celtics are on the brink, so there has been lots of harm in La La Land and Beantown.  However – and as mentioned in the recent STR – there has been no harm to the underlying uptrends for the “500” remain in force.  So far, the recent volatility in commodities, rates, and the dollar has not spilled over into equities.  As a result, the parameters we listed in the STR remain in force.

For resistance, a post-March diagonal triangle allows for marginal new highs in the 1371-1376 area.  Any extension should go no higher than 1405.

Meanwhile,...
By Walter Murphy on 5/9/2011 7:49 PM
Below are the “Plain English” summary points from our most recent Short Term Review. 

For subscription information for the full reports, please e-mail customerservice@wminsights.com.

Stocks: The S&P 500 recorded a new recovery high during the early hours of last week, but that rally was repelled by the 2008-2011 resistance trend line. Even so, the subsequent decline into Thursday’s low was well contained. No important uptrend has been reversed; even the uptrend from last March’s low remains in force. By definition, therefore, the larger uptrends stretching back to 2009 remain in play.

The Rest of the World: The weekly Coppock Curve has a bearish bias for 15 of the 20 major markets in our universe, but has a bullish bias for 10 of the 17 developing markets. This suggests continued relative strength for developing market compared to larger markets. However, the relative strength pattern may have made a January-April double-top. If relative...
By Walter Murphy on 5/5/2011 2:45 PM
On Wednesday, the S&P 500 fell 0.7%.  This was the largest setback during the current three-day losing streak.  Declining stocks exceeded winners by almost 4:1 while the up/down volume ratio was negative by a more modest 3:1 margin. Total volume increased by 3% and remains above its 21-day ma. The daily Coppock Curve has a bullish bias for 22 of the 24 S&P industry groups and for 27 of the 30 stocks in the DJIA.

Although Wednesday’s selling was fairly intense, the S&P did manage to hold support.  That is a good thing.  However, there are some mixed signals.  For example, the 2008-2011 resistance trend line has repelled (at least for now) this latest rally attempt.  In addition, the Bullish Percentage Index for many indexes that we look at is seeing its 5-day ema cross below the 21-day ema.  And, of course, volume continues to be relatively light.  By contrast, the daily Coppock Curve still has a bullish bias, as does the McClellan Summation Index.  Moreover, the decline of the last three days is more corrective...
By Walter Murphy on 5/3/2011 8:27 AM
Stocks: Two important Fibonacci relationships suggest that the 2007 high is under siege. In addition, a number of market indexes (including both the DJ Industrials and Transports), as well as the NYSE advance-decline lines (both all issue and common stock only), have also achieved new 2009-2011 recovery highs. Historically, when the major averages and (especially) breadth are in gear to the upside, corrections tend to be interruptions within, but not reversals of, the major trend.

Yields and the Long Bond: The Elliott Wave/Fibonacci patterns are not as clear for 30-year yields as they appear to be for 10s. However, a head-and shoulders top appears apparent for 30-year yields. In that regard, 30s are currently testing the 4.39%-4.36% neckline. Since the height of the head was about 40 bps, a breakdown through the neckline would imply further weakness to the 4.00% area.

US Dollar: The non-Elliott Wave evidence is at least as constructive now as it was a month ago. However, it is apparent that the dollar...
By Walter Murphy on 4/28/2011 1:58 PM
On Wednesday, the S&P 500 rallied 0.6%to another 2009-2011 recovery high. Advancing stocks exceeded losers by a bit less than 2:1 while the up/down volume ratio was positive by a more robust 5:4 margin. Total volume was little changed and remains above its 21-day ma. The daily Coppock Curve has a bullish bias for 20 of the 24 S&P industry groups and for 25 of the 30 stocks in the DJIA.

For some time we have pointed to 1353 as an important resistance level. As a reminder, that is the point at which the rally from the July 2010 low is 61.8% of the previous rally from March 2009 to April 2010. It also confirms the importance of last December’s breakout through 1229, which was a 61.8% retracement of the entire 2007-2009 bear market. When a 61.8% relationship is breached, the next logical Fibonacci multiple is equality. Thus, both the rally of recent months through 1229 and the current breach of 1353 imply that the S&P is positioned to test its 2007 high. Moreover, the fact that the NYSE all-issue advanced decline...
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