Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 12/15/2014 4:47 PM
“Plain English”

US Equities: From an Elliott Wave perspective, it is fairly easy to count the S&P’s post-October rally as a five wave pattern and the current decline as an overlapping counter-trend pattern. This combination suggests that the current decline should prove to be a correction within a larger uptrend. However, momentum remains weak, sentiment is overbought, and minimum 38.2% retracements have yet to be achieved.

Global Equities: The global post-July downtrend appears to have resumed. This suggests a possible – if not probable – test of the Dow Jones Global (ex US) World Index’s October low near 217. With that in mind, the 217-209 range has proved to be both important support and important resistance over the past five years. Thus, if the current decline decisively breaks 217, current support will likely become new resistance.

Interest Rates: The potential for an improving weekly Coppock oscillator suggests that the early weeks/months of 2015 will have a bullish bias for US yields....
By Walter Murphy on 12/11/2014 4:41 PM
On Wednesday, the S&P fell 1.64% to 2026, the DJIA lost 1.51% to 17533, and the NASDAQ retreated 1.73% to 4684. NYSE declining stocks exceeded winners by 12:1 while the up/down volume ratio was bearish by more than 15:1. The daily Coppock Curve has a bearish bias for 415 of the S&P’s 500 stocks, for 24 of 30 DJIA stocks, and for 88 of the stocks in the NASDAQ 100.

Today’s S&P decline was the largest since October 13 and the NYSE breadth ratio was the fifth most negative of the year. Globally, the Dow Jones Global (ex) US Index has had only 15 larger losses this year. This, plus overbought sentiment and intermediate momentum indicators, suggests that still lower lows are in the offing.

That said, we are paying attention to three indexes.

1) The S&P 500 is approaching potentially important chart support and a 23.6% retrace of the October-December rally at 2020-2018. Beyond that range, a break of 2003 will allow for further weakness toward a 38.2% retracement at 1983.

2) The NYSE Composite...
By Walter Murphy on 12/9/2014 2:38 PM
“Plain English”

US Equities: The market is not likely at risk of an imminent major correction. History suggests that, as long as breadth continues to confirm the market’s uptrend, a significant top is likely at least three to six months away. This indicates that the post-October rally is a better fit for an impulsive post-2009 wave-seven rally rather than a counter-trend “B”-wave rally within a still-developing ABC wave-six correction.

Global Equities: We are struck by the relative strength of the S&P 500 compared to the MSCI Emerging Markets Index. The S&P appears to have completed a multi-year base that effectively reverses the relative downtrend that has been in force since at least 2001 and arguably from 1998. Since the relative breakout is still short of a 38.2% retracement, the S&P is positioned to continue to show relative strength against developing markets for some time to come.

Interest Rates: Even as the US 10-30 spread is widening, the spread between US and German 10-year yields...
By Walter Murphy on 12/4/2014 4:09 PM
On Wednesday, the S&P gained 0.38% to 2074, the DJIA added 0.18% to 17193, and the NASDAQ rallied 0.39% to 4774. The senior indexes recorded new all-time highs, but the NASDAQ failed to achieve its own post-2009 benchmark. NYSE advancing stocks exceeded losers by 11:4 while the up/down volume ratio was bullish by a slightly more modest 7:3 margin. The daily Coppock Curve has a bullish bias for 269 of the S&P’s 500 stocks, for 16 of 30 DJIA stocks, and for 56 of the stocks in the NASDAQ 100.

We regularly refer to sentiment as an important conditional or environmental indicator for the market. For example, we have noted when the Investors Intelligence bull-bear difference reaches the “danger zone” of 40 and above (as has been the case in recent weeks). Similarly, in the just-released monthly we pointed out that our proprietary sentiment index just reached 90 (on a scale of 0-100) for only the sixth time since the 2009 low. These are but two examples of overbought sentiment indicating excessive enthusiasm.

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By Walter Murphy on 12/1/2014 4:14 PM
“Plain English”

US Equities: For a good bit of time following October’s low, it was difficult to discern whether the October-November rally was the “B”-wave of a still-developing correction from September’s high or whether the post-September correction was over and the underlying multi-year uptrend had resumed. However, the rally was impulsive. This indicated that still higher highs were in the offing, regardless of the label. Those higher highs continued on throughout November. Indeed, by the end of the month the S&P had recorded six consecutive weeks with both a higher high and a higher low. This, plus other developments indicated that the internals of the rally were not characteristic of a counter-trend event. Thus, any thoughts that this is a “B”-wave rally have been virtually eliminated. The weight of the evidence is that the market is in a new rally – wave-seven – within the post-2009 uptrend.

The Rest of the World: A review of the 37 markets in our universe reveals that 11 finished last week...
By Walter Murphy on 11/24/2014 7:38 PM
“Plain English”

US Equities: While the evidence is not yet entirely conclusive, the current rally’s underpinnings are typically not characteristic of a counter-trend “B”-wave within a still-developing wave-six correction. Rather, these underpinnings are a better fit for an impulsive wave-seven rally. Further strength that allows the all-issue a-d line to achieve new highs, the breadth-thrust ratio to remain above 50, and the Summation Index to carry nicely above “500” will help make the underpinnings that much more conclusive. A breakout through 2095 will seal the deal.

Global Equities: Since October’s low the Dow Jones index has retraced well less than 50% of the July-October decline while our global daily cumulative a-d line has retraced significantly more than 61.8% of its September-October correction. This suggests that the rally of recent weeks has a broader base than the index suggests.

Interest Rates: The improving weekly oscillator for 30-year yields has the potential to have at least...
By Walter Murphy on 11/20/2014 6:35 PM
On Wednesday, the S&P experienced only its second down day in the past 11 sessions with a 0.15% loss. The DJIA was virtually unchanged and the NASDAQ lost 0.57%. NYSE declining stocks exceeded winners by 2:1 while the up/down volume ratio was bearish by a more modest 8:5 margin. The daily Coppock Curve has a bearish bias for 19 of the S&P’s 24 industry groups, for 23 of 30 DJIA stocks, and for 82 of the stocks in the NASDAQ 100.

For many weeks prior to the September-October sell-off we maintained that 2057-2074 was a strong – even a best case – band of Fibonacci resistance. That sell-off did not change things by much in that a possible post-October “B”-wave rally expands this range by only 1% to 2095.

One of our favorite “Murphy’s Law” is that the most important tools in the analyst’s toolbox are a pencil and a ruler. Thus, it is with more than passing interest that we note that the dominant resistance uptrend line from 2009 is currently at 2058 and rising at the rate of 3.61 points per week. At...
By Walter Murphy on 11/17/2014 4:22 PM
“Plain English”

US Equities: The rally from October’s low is a five-wave structure for the S&P. This, plus the constructive weekly momentum underpinnings, signals that the trend remains up and higher highs are still to come. While such a larger rally pattern could still prove to be a “B”-wave with upside potential to as high as 2095, the risk is that it is the kick-off for wave-seven from the 2009 low.

Global Equities: The weekly Coppock indicator is currently below the neutral zero line for 13 of the 20 non-US major markets and for 10 of the 17 developing indexes. This indicates that the trend for a significant majority of global market indexes remains down.

Interest Rates: We continue to believe that the next primary low (most likely early next year) has the potential to mark the transition from a multi-decade (since 1981) bear market in yields to what should be a multi-decade bull market. More immediately, the improving weekly oscillator for 30-year yields has the potential to have at least...
By Walter Murphy on 11/13/2014 12:00 PM
On Wednesday both the S&P 500 and DJIA fell by less than 0.1% but the NASDAQ gained 0.3%. NYSE advancing stocks exceeded losers by 5:4, but the daily cumulative a-d line remains below its August high. The daily Coppock Curve now has a bearish bias for 22 of the S&P’s 24 industry groups, for 23 of 30 DJIA stocks, and for 83 of the stocks in the NASDAQ 100.

Earlier today Investors Intelligence reported that the percentage of bears in their weekly sentiment survey had dropped back below 15%. This is a rather rare occurrence – readings below 15% have happened less than 5% of the time in the past 45 years. On a more near term basis, this is the fourth time this year – and only the ninth time since the 2009 low – that the bears were below 15%. Indeed, there are fewer bears now than there were during the week of the recent September market peak. This prompted us to take a look at how extreme these readings are from a big picture perspective.

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By Walter Murphy on 11/10/2014 5:56 PM
“Plain English”

US Equities: The S&P 400 (mid cap), the S&P 600 (small cap), and the broad NYSE Composite indexes all failed to confirm the new highs by the large cap S&P and DJIA indexes with new highs of their own. Moreover, the NYSE daily cumulative advance-decline line remains below its August high while the NYSE bullish percent index is well below its high. Continued strength could erase these divergences so it is incumbent on the market to continue its rally from the October low.

Global Equities: A review of global markets reveals that many European indexes recently broke uptrend lines that had been in force since at least 2012 and some as far back as 2009. Moreover, the volatility of recent weeks increases the possibility top formations are developing. Thus, October’s low is regionally – if not globally – important support.

Interest Rates: Our proprietary sentiment index remains on the oversold side of neutral. The index, which is based on a scale of 0-100, is currently at 19.9 (up...
Market Pulse
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