Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 6/28/2011 6:22 AM
Equities: SPY has been testing its March low (125.28).  The test has been successful so far and the daily Coppock is improving.  This combination allows for a short term rally.  The dominant resistance trend line will be in the 128-129 area during the coming week, which is just below first chart resistance near 130.  Thus, a rally through 128-130 would be viewed as a breakout and allow for further strength toward 131-133, which is both chart and Fibonacci resistance.  Conversely, a decline through the March low would open the door for a challenge of 123-122.

Bonds: TLT remains in its May-June trading range.  Thus, the potential for a rally to 98.70-99.30 still seems possible.  However, both the daily and weekly Coppock oscillators are showing signs of fatigue.  This suggests that the post-February uptrend – even if it challenges resistance – is in its latter stages.  Thus, 95.13 is viewed as key support.  A breach would complete a top formation and would be viewed as a serious downside reversal.

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By Walter Murphy on 6/24/2011 12:42 PM
On Thursday, the S&P 500 posted its second straight decline with a loss of 0.3%.  Declining stocks exceeded winners by 3:2 while the up/down volume ratio was bearish by a more robust 7:4 margin.  Turnover surged by 30%.  The daily Coppock Curve still has a bullish bias for all 24 S&P industry groups and for 26 of the 30 stocks in the DJIA.

Oil (WTI crude) fell 4.6% today. This was the fourth time since early May that oil fell by at least 4.5%. Before May we had to go back to February 2010 to find the previous loss of 4.5% or more.

That said, the more important development from our perspective was the breach of chart support generated by previous resistance at the 92-91 breakout point. In turn, this break does much to validate the March-June head-and-shoulders top formation. The count generated by that pattern suggests that oil now has the potential to test 86-84 and arguably 81-80 in the weeks ahead. The potential for these lower lows is bolstered by the fact that the weekly Coppock Curve is positioned...
By Walter Murphy on 6/22/2011 5:07 PM
On Tuesday, the S&P 500 was up for the fourth consecutive day (and seven of the past nine days) with a gain of 1.3%.  Advancing stocks overwhelmed losers by better than 10:1 while the up/down volume ratio was bullish by a more modest 8:1 margin.  Turnover increased by 16% but is below its 21-dma.  The daily Coppock Curve has a bullish bias for all 24 S&P industry groups and for 29 of the 30 stocks in the DJIA.

In recent comments we have made the case that a rally through the 1295-1294 breakdown point would imply further strength to 1312-1319 and perhaps higher.  So today’s rally to 1297.62 is a step in the right direction.  That said, it is important to note that today’s high was the first higher high since the May peak.  This, by definition, reverses the May-June downtrend’s series of lower highs.  All of this is buttressed by the fact that the daily Coppock Curve has turned up for the S&P, the DJIA, and the NASDAQ.  Thus, Tuesday’s higher high portends still higher highs in the days ahead.

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By Walter Murphy on 6/20/2011 2:38 PM
Stocks: The “mechanical” 2009-2010 uptrend line is in reasonable harmony with chart support generated by last March’s low. If the “500” declines through 1249-1219, it will not matter whether we focused on trend line support, chart support, or Fibonacci support.

The Rest of the World: Our index-based global advance-decline line has completed a top formation that stretches back to late March.

10-Year Yields: Last week 10-year yields surged through 3.01% – and then reversed to new post-April lows. While the rally through 3.01% reversed the April-June decline, it was not enough to reverse the larger post-February downtrend. Thus, our inclination is to treat the new low as either part of a bottoming process or as a brief extension of the post-April pattern.

Commodities: From our perspective, the most important commodity development last week was oil’s breakdown from a month-long trading range. At the least, that breach suggests that oil has begun a second leg down from the late May high.

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By Walter Murphy on 6/16/2011 2:08 PM
On Wednesday, the S&P 500 fell 1.7%, which was more than enough to take back the gains of the previous two-day rally.  More importantly, Wednesday was a 9:1 down day as declining stocks exceeded winners by 12:1 and the up/down volume ratio was bearish by better than 11:1.  Moreover, total volume increased by 16% after having declined for each of the prior two up days.  The daily Coppock Curve has a bearish bias for 23 of the 24 S&P industry groups and for 26 of the 30 stocks in the DJIA.

The S&P 500 has now retraced almost 90% of its previous March-May rally.  This is deep enough to say that the index is testing those March lows.  Unfortunately, our sense is that further weakness to below the March low is likely regardless of whether such a probe occurs now or after an oversold rally.  There are several reasons for that expectation.  For example – and as mentioned in the last STR and yesterday’s conference call – the internal indicators (e.g., breadth and the BPI) are already below their own March low,...
By Walter Murphy on 6/9/2011 8:03 PM
There is enough interest to proceed with plans for our introductory conference call.  Details will follow, but the working scenario is that it will be next Tuesday morning.

On Wednesday, the S&P 500 recorded its sixth straight loss with a decline of 0.4%.  Declining stocks exceeded winners by 10:3 while the up/down volume ratio was negative by a more robust 7:2 margin.  Total volume increased by 12% and moved above its 21-dma.  The daily Coppock Curve has a bearish bias for all 24 S&P industry groups and for 24 of the 30 stocks in the DJIA.

In recent comments we have listed a number of developments that have indicated that the rally from last summer’s low has been reversed.  The most obvious was last week’s decisive break of the dominant uptrend line.  That breach implied at least a test of last March’s low (1249) and probably a minimum Fibonacci objective of 1233.  The potential for a decline to those targets gained some ammunition over the past day of two as the S&P has now exceeded a 61.8% retracement...
By Walter Murphy on 6/8/2011 5:54 PM
On Tuesday, the S&P 500 recorded its fifth straight loss with a decline of 0.1%.  While the up/down volume ratio was marginally negative, advancing stocks exceeded losers by 7:5.  Total volume was essentially unchanged, but is testing its declining 21-dma.  The daily Coppock Curve has a bearish bias for 22 of the 24 S&P industry groups and for 23 of the 30 stocks in the DJIA.

As mentioned, the S&P is now on a five-day losing streak.  The two previous losing streaks of five or more days ended on July 2, 2010 and March 3, 2009.  Both were within 1-5 days of the start of a multi-month uptrend.   This, plus the fact that only 25% of all stocks are above their 50-dma, suggests that a relief rally may be imminent.  Thus, we remain hesitant to declare yesterday’s breach of 1294 as “decisive.”

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By Walter Murphy on 6/7/2011 9:43 AM
Stocks: From the perspective of the Bullish Percent Index (BPI), most indexes have already broken down from an important top formation. Although no index or group yet has a BPI below 50%, the indicator – which did not confirm the May high – has confirmed the weakness of recent weeks. This implies still lower lows in the weeks ahead.

The Rest of the World: Our global advance-decline line now has a double-top generated by peaks in early and late May. A rally to new highs would be an important breakout. By contrast, there is an April-May double-bottom. A breakdown through those lows would complete a potentially significant top formation and, by extension, a possible trend reversal.

Yields and the Long Bond: We have had a constructive outlook for the iShares Barclays 20+ Year Bond ETF (TLT) since March and, in recent comments, we have pointed to objectives above 98. Momentum is still constructive on both a near and medium term basis. However, both the daily and weekly Coppock Curves are overbought and...
By Walter Murphy on 6/2/2011 4:15 PM
On Wednesday, the S&P 500 reversed Tuesday’s solid gain with its largest decline since last August.  The 2.3% loss was accompanied by a 16:1 negative breadth ratio and an even more bearish 20:1 down/up volume ratio.  The result was the first 9:1 down day since March.  These bearish statistics were bolstered by the fact that total volume increased by 4%.  The daily Coppock Curve has a bearish bias for 18 of the 24 S&P industry groups and for 19 of the 30 stocks in the DJIA.

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The obvious reaction to Wednesday’s sell-off is that it erased all the good done by Tuesday’s rally.  At the least, Wednesday’s decline carried the S&P back into the downtrend channel from...
By Walter Murphy on 5/31/2011 8:09 PM
On Tuesday, the S&P 500 came back from the long holiday weekend with gusto.  The index’s 1.1% gain, which was its best performance in over a month, extended its current winning streak to four days.  Advancing stocks exceeded losers by almost 5:1 while the up/down volume ratio was positive by a more modest 7:2 margin.  Total volume surged by 52% over Friday’s pre-holiday level.  The daily Coppock Curve now has a bullish bias for 16 of the 24 S&P industry groups and for 22 of the 30 stocks in the DJIA.

In recent blogs we highlighted evidence that suggested a pending rally.  For example, last Wednesday we highlighted the bullish outside day.  That was followed by Thursday’s comments on the constructive put/call ratio and the oversold daily Coppock Curve.  Our conclusion was that the “500” was positioned for an oversold rally.  With that in mind, it is important to note that the decline from the May 2 high failed to decisively break below the uptrend from last July’s low.  Thus, it is perhaps even more important...
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