Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 8/24/2015 3:22 PM
“Plain English”

US Equities: The S&P 500 has effectively breached the support trend line from the 2011 low. At the same time, the DJIA has also broken its post-2011 support line and is on the verge of doing the same to the much more significant 2009-2015 uptrend line. These trend line breaks, plus momentum and Elliott Wave considerations suggest that lower lows are still to come. From a momentum perspective, the weekly Coppock Curve is positioned to remain weak against most S&P sectors and most DJIA stocks into late September or early October. At the same time the monthly oscillators are positioned to remain weak for most US sectors – and most countries – into the second quarter of next year. Meanwhile, the quarterly oscillator, which is a reflection of the expansion and contraction of the secular trend, is peaking. Indeed, as of Friday, this oscillator is deteriorating and positioned to remain under pressure for many quarters to come.

Global Equities: For some time we have been focused on the Dow...
By Walter Murphy on 8/18/2015 8:50 AM
US Equities: So far, this has been more of a time correction rather than a price correction. That said, 2044-2039 remains important support for the S&P 500. Moreover, the support trend line connecting the February and July lows has proved its mettle in recent days; this line will be moving through 2061-2067 for the rest of August. A decisive break of 2044-2039 will complete a top formation, confirm a reversal of the post-October rally pattern, and indicate further weakness toward 1992-1972 – which involves chart, Fibonacci, and trend support.

Global Equities: Our preference is to count the Dow Jones (ex US) Global Index’s July 2014 high as the end of an ABC rally from the 2009 low. That count has been bolstered by the fact that the index’s weekly closing chart has broken below its 2009-2015 uptrend line. However, the pattern since last July is corrective; on the surface, this suggests that there is still unfinished business to the upside. Some clarity can be gleaned from the Dow Jones Global Index, which...
By Walter Murphy on 8/14/2015 10:43 AM
On Thursday, the DJIA rallies 0.03% but the S&P 500 fell 0.13% and the NASDAQ lost 0.21%. NYSE declining stocks exceeded winners by 5:4 while the up/down volume ratio was bearish by a more robust 7:4 margin. The daily Coppock Curve has a bullish bias for 280 of the S&P’s 500 stocks, 21 of the 30 DJIA stocks, and only 49 of the stocks in the NASDAQ 100.

Readers are undoubtedly aware of the recent market turmoil that many “experts” attributed to news out of China. It seems that Greece is so … yesterday. Our guess is that China is headed for the same fate as Greece as a supposed market mover.

In any event, we try to avoid getting caught up in the day’s news for at least two reasons. First, the market is a leading indicator and tends to look weeks and (more often) months ahead. A given day’s reason/excuse is nothing more than filler for the various new organizations. Second, the brouhaha of recent days reminds us of Joe Granville’s observation that “If it’s obvious, it’s obviously wrong.”

Instead,...
By Walter Murphy on 8/10/2015 3:24 PM
Last week the S&P 500 fell 1.25%, the DJIA lost 1.79%, and the NASDAQ declined 1.65%. The weekly NYSE all-issue a-d line was bearish by almost 2:1, while the up/down volume ratio was bearish by a more modest 3:2 margin. The weekly Coppock Curve has a bearish bias for 284 of the S&P’s 500 stocks, 19 of the 30 DJIA stocks, and 57 of the stocks in the NASDAQ 100. The weekly oscillator for the S&P 500 index has moved below its neutral zero line for the first time since October.

As most readers are likely aware, we have repeatedly stated that as long as the NYSE daily cumulative advance-decline line continues to confirm new highs by the major averages, the market is likely not at risk of a major reversal. As such, market pullbacks should prove to be a correction within an uptrend.

With that in mind, the two most important market peaks in recent years occurred in 2007 and 2011. The first had a breadth divergence, the second did not. The 2007 divergence was followed by a 58% loss of value to levels not...
By Walter Murphy on 8/6/2015 12:23 PM
“Plain English”

US Equities: A majority of the stocks in the broad S&P 1500 ended July at least 10% below their 52-week high even though the index itself was only 1.37% away from its all-time high. Since many observers are hung up on the notion that a 10% correction connotes a “correction” and a 20% sell-off defines a “bear market,” we should also add that over 25% (387) of the 1500 stocks finished last month at least 20% below their high. So there is clearly a “stealth” correction/bear market going on underneath the widely observed dull indexes.

Sectors: The four largest sectors – Technology, Financials, Health Care, and Consumer Discretionary – all increased their weightings in July. We view Consumer Discretionary, Health Care, and Consumer Staples favorably. Utilities, Industrials, and Energy are viewed unfavorably.

The Rest of the World: The Dow Jones Global (ex US) index had been probing its 2009-2015 weekly support trend line. A decisive breach of this trend line would be a confirmation...
By Walter Murphy on 7/27/2015 4:23 PM
“Plain English”

US Equities: The broadest measure of price is the daily cumulative advance-decline line. The NYSE common-stock a-d line is on the verge of making a year-to-date low and the all-issue a-d line is not far from doing the same. This, plus the fact that over half of the stocks in the broad S&P 1500 are 10% below their 52-week high, suggests that price has cast its vote (with indicators) that the market’s post-October uptrend has been reversed despite the S&P 500’s ability (so far) to hold support.

Global Equities: The Dow Jones Global (ex US) Index has regularly been testing its weekly 2009-2015 support trend line and our fatigued global daily cumulative a-d line is completing an Elliott Wave five-wave pattern that began in 2012. This combination suggests that both the index and the a-d line are increasingly at risk of the largest decline in months – and perhaps years. A late-summer rally will be viewed with that risk in mind.

Interest Rates: The weekly Coppock Curve for 10-year...
By Walter Murphy on 7/23/2015 12:26 PM
On Wednesday, the S&P 500 fell 0.24%, the DJIA lost 0.38%, and the NASDAQ retreated 0.70%. NYSE declining stocks exceeded winners by 62 issues while the up/down volume ratio was bearish by a 4:3 margin. The daily Coppock Curve has a bullish bias for 305 of the S&P’s 500 stocks, 19 of the 30 DJIA stocks, and 71 of the stocks in the NASDAQ 100.

AAPL, AAPL, AAPL. In recent days it seems that all we hear and read about is Apple. Much of the heat came today as the stock lost as much as 6.7% before recovering. These difficulties, plus those from Microsoft and IBM, are attributed to disappointing earnings reports and are used as reasons for recent declines in the popular averages.

To put that last point into perspective, the respective DJIA weightings for AAPL, IBM, and MSFT are 5, 3, and 25. At the end of June, AAPL and MSFT were the two most heavily weighted components in the S&P (IBM did not make the top 10). Those two are also the heaviest weights in the NASDAQ 100. So it makes sense that, when AAPL...
By Walter Murphy on 7/21/2015 3:02 PM
“Plain English”

US Equities: As a group indicators are oversold. This exists even as the prospects for a 20-week cycle low appear high. As a result, the potential exists that the rally of the past two weeks is the opening salvo in a larger uptrend. However, given that the indicators have achieved levels not seen in years, there is a case to be made that the recent indicator oversold levels represent a confirming bad oversold condition. If so, then this new rally may well result in an increase in bearish divergences (in terms of both quality and quantity) and be followed by an S&P decline that should carry back through the recent 2044 low.

Global Equities: The April-July decline by the Dow Jones Global (ex US) index is easily counted as an overlapping five-wave pattern, which indicates that it is an Elliott Wave diagonal triangle. A diagonal is an ending pattern, so this would suggest that the three-month decline is a final “C” wave. The “C” wave potential is buttressed by the fact that the decline...
By Walter Murphy on 7/16/2015 3:00 PM
On Wednesday, the S&P 500 fell 0.07%, the DJIA lost 0.02%, and the NASDAQ retreated 1.12%. NYSE declining stocks exceeded winners by 5.3 while the up/down volume ratio was bearish by a more modest 15:8 margin. The daily Coppock Curve has a bullish bias for 414 of the S&P’s 500 stocks, all 30 DJIA stocks, and 85 of the stocks in the NASDAQ 100.

As noted in recent comments, many indicators have deteriorated to a degree not seen since October. By contrast, the indexes have held up relatively well. This prompted us to wonder if we could quantify the significance of this negative divergence. We examined monthly data since the 2000 peak and compared the S&P 500 with its 12-month RSI. We chose the RSI rather than the Coppock Curve because we wanted an indicator that always has a value in excess of zero.

The study calculates the percentage spread between the S&P’s monthly close and its 12-month high as well as the percentage spread between the RSI and its own 12-month high. We then subtracted the RSI spread...
By Walter Murphy on 7/14/2015 12:07 PM
“Plain English”

US Equities: The weekly Coppock Curve for the S&P 500 is positioned to break below its zero line by as early as next week. Since and including the 2009 low, the weekly oscillator has turned up from below its neutral zero line six times. Each of those was followed by a rally by the oscillator back above “zero” and by the “500” to new highs. The last such bullish momentum reversal occurred in October. Thus, a Coppock breach of zero has the potential to be the first step in an important bottoming process.

Global Equities: We have been counting China’s recently reversed multi-month rally as a “C”-wave, so it could be expected to end badly. Last week, the SSE Composite index tested the important 3400-3100. However, the daily Coppock Curve is lower than at any time in the 15 years we examined (including the 2007-2008 bear market). This momentum extreme suggests that a coming oversold rally will prove to be a counter-trend event in the context of an even larger downtrend. Relief rally resistance...
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