Market Pulse
Author: Created: 3/10/2010 11:54 AM
Market Pulse
By Walter Murphy on 7/28/2014 6:32 AM
“Plain English”

US Equities: Various daily cumulative advance-decline lines have recently failed to make new highs along with the most recent highs in some of the major averages. However, it is important to note that the NYSE a-d line did make an all-time high earlier this month, as did the various S&P a-d lines (for the 500, 400, 600, and 1500 indexes). Typically, a-d lines lead market peaks by 3-6 months, if not longer. This was the case in 2007; a more extreme divergence occurred at the 2000 secular peak. Thus, since the current NYSE breadth divergence can be measured in days rather than months, it is regarded as a short term divergence.

Global Equities: The weekly Coppock Curve has a bearish bias in absolute terms for 23 of the 37 non-US markets in our universe and for 26 markets relative to the S&P 500. The absolute momentum pressures are positioned to maintain a majority bearish condition through the third quarter. By contrast, the relative pressures are positioned to begin improving in late...
By Walter Murphy on 6/23/2014 12:27 PM
“Plain English”

US Equities: We regularly point out that price is the final arbiter. So, as long as the indexes maintain their uptrends confirmed by new advance-decline line highs, the risk of a major bearish reversal is considered to be low. That said, the absolute level of certain indicators can also have bullish implications even if there are bearish divergences.

Global Equities: The Dow Jones Global (ex US) Index has been in a downtrend relative to the S&P 500 since 2009. The weekly relative Coppock appears to be peaking but, if subsequent weakness results in a positive divergence and is then followed by a breakout through the dominant downtrend lines, the Dow Jones index would then be positioned for a multi-month uptrend relative to the S&P.

Interest Rates: Sentiment is oversold and the weekly Coppock Curve is bottoming. Thus, our inclination is to count the decline from December’s 3.04% high to the recent 2.40% low as a complete ABC pattern. However, even if May’s low completed an ABC...
By Walter Murphy on 6/19/2014 2:25 PM
On Wednesday the S&P 500 posted its fourth straight gain with a 0.8% rally to 1956.98 to another all-time high. Both the DJIA and NASDAQ underperformed with 0.6% gains. NYSE advancing stocks exceeded losers by almost 7:2 while the up/down volume ratio was bullish by a more modest 4:1 margin. Turnover improved for the third straight day. The daily Coppock Curve has a bearish bias for 17 of the S&P’s 24 industry groups, for 19 of 30 DJIA stocks, and for 63 of the stocks in the NASDAQ 100.

In today’s Breakfast with Dave, friend and former Merrill Lynch colleague Dave Rosenberg noted that “if the S&P 500 were to peak here, it would be at a point where average retail buying in the cycle is still relatively muted… .” Dave noted that at the 2000 peak the five-year average of equity mutual fund and ETF inflows was almost $20 billion and the 2007 peak was over $15 billion, while the current flows are closer to $8 billion. Based on these numbers, Dave anticipates a “final melt-up.”

On the surface, this is...
By Walter Murphy on 6/17/2014 7:21 PM
“Plain English”

US Equities: The intermediate trend is becoming increasingly fatigued. At the same time, the monthly oscillator is overbought and deteriorating for the S&P, DJIA, and NASDAQ. Thus, the next short term peak could have bearish implication for both the intermediate and primary trends.

Global Equities: Last week the Dow Jones Global (ex US) Index finished at 247.40, eking out a 0.01 point gain from the prior week’s 247.39 close. Nonetheless, this was enough for the index to post its fifth consecutive weekly gain, which is its longest winning streak since August. However, the weight of the evidence continues to suggest that the post-February momentum uptrend is in its latter stages.

Interest Rates: While sentiment is oversold and the rally from May’s 2.40% low is challenging important resistance downtrend lines, the daily Coppock is peaking and the still-overbought monthly oscillator is in a confirmed downtrend. Moreover, the weekly indicator – which is bottoming – has yet to record...
By Walter Murphy on 6/16/2014 3:11 PM
On Thursday the S&P 500 posted its third straight loss with a 0.7% decline to 1930.11. The losing streak is the longest since early April. The DJIA also lost 0.7%. Declining stocks exceeded winners by 9:4; the up/down volume ratio was bearish by a similar margin. Turnover increased by 14%. The daily Coppock Curve has a bearish bias for 22 of the S&P’s 24 industry groups and for 20 of 30 DJIA stocks.

We can make the case – and until proven otherwise will operate on the notion – that the pullback of recent days is the fourth wave within the still-developing uptrend from the mid-April 1814 low and possibly only from the late-April 1850 low. If so, then 1926-1903 should be solid nearby support. The ability to hold this range will lay the foundation for a renewed strength to higher highs above Monday’s 1955.55 all-time peak.

From a bigger picture perspective, there is potentially significant support in the 1902-1850 range. The upper end represents May’s breakout point while the lower level is February’s...
By Walter Murphy on 6/5/2014 7:06 AM
“Plain English”

US Equities: There has been much talk of the recent low volume. Conventional wisdom has it that such a condition can lead to a bearish reversal. The fact is that volume, as represented by a 21-day ma of NYSE composite volume has been in a downtrend since March 2009. Since then, there have been a series of lower highs and lower lows. If anything, rallies have been operating in what can be described as a calm, orderly environment. This is best exemplified by the fact that on-balance volume, like breadth, is at an all-time high. We will let the low volume worry-warts continue to worry.

The Rest of the World: Our global daily cumulative advance-decline line recorded a series of all-time highs last month. More importantly, our regional a-d lines for Europe and the PacRim also made new highs, as did the a-d line based on the stock markets for the world’s 10 largest economies. As long as breadth confirms the uptrend in an underlying market index, a significant reversal is not likely for...
By Walter Murphy on 5/29/2014 10:15 AM
On Wednesday the S&P 500 broke a four-day winning streak with a loss of 0.1%; the DJIA had a larger 0.3% loss. Declining stocks exceeded winners by 7:5; the up/down volume ratio was bearish by a more modest 15:14 margin. Turnover was little changed. The daily Coppock Curve still has a bullish bias for 14 of the S&P’s 24 industry groups but has a bearish bias for 17 of 30 DJIA stocks.

We have regularly pointed out that there has historically been an inter-market relationship between the S&P, yields, the euro, and select commodities. With that in mind, it seems important to note that 10-year yields, the euro, and gold have all recently broken down through important support trend lines. These breakdowns, along with price counts and weak momentum, suggest that lower lows are likely for these assets.

Nonetheless, and despite these inter-market pressures, the S&P has continued higher to all-time highs.

So the question is: Who missed the message? Was it the “500” or the other three asset classes?...
By Walter Murphy on 5/27/2014 1:21 PM
“Plain English”

US Equities: The long term support line for the S&P begins at the 2011 lows. The daily version of this line will be in the 1821-1825 range this week. For our purposes, the related resistance line is more important. This line, which can be traced back to at least early 2011, and arguably to early 2010, is cutting through 1921-1922. This range is important because, in previous comments, we have suggested that any rally that fails to break 1915-1920 resistance (based on Fibonacci and measured moves) would be “disappointing.”

Global Equities: We have been making the case that momentum pressures will begin to become more obvious in late May or June and that still seems to be a reasonable expectation. This will be all the more likely if the Dow Jones (ex US) Index fails to rally decisively through 244-247 in the weeks ahead.

Interest Rates: In our 2014 Year Ahead, we noted that the yield rally from the 2012 low was in its later stages and that the subsequent decline would be viewed...
By Walter Murphy on 5/22/2014 3:59 PM
The S&P 500 posted its third gain in four sessions on Wednesday with a rally of 0.8%; the DJIA had a larger 1.0% gain. Advancing stocks exceeded losers by 5:2; the up/down volume ratio was bullish by a slightly larger margin. Turnover fell for the eighth time in 10 sessions. The daily Coppock Curve has a bullish bias for 13 of the S&P’s 24 industry groups and for 15 of 30 DJIA stocks.

On Wednesday Investors Intelligence (II) released their weekly Advisors Sentiment poll. We were struck by three things bulls are at their highest level since January, bears remain below 20%, and the difference between the two (38.9%) is close to what II calls the danger zone, signaling “elevated risk.”

We have been monitoring the II data for many years and respect the danger zone. However, these numbers, like any sentiment reading, are more of a conditional indicator than a timing tool. As a result, we are more interested in the trend of the bull-bear spread than its absolute level. An examination of the nearby chart...
By Walter Murphy on 5/19/2014 4:35 PM
“Plain English”

US Equities: As noted in earlier comments, at least one-third of the stocks in the S&P 600 have decline by more than 20% below their 52-week high. Similarly, the index’s Bullish Percent Index is at its lowest level since October 2011 – but is still not in oversold territory. This, plus the fact that both the weekly and monthly Coppock Curves for the “600” have a bearish bias, suggests lower lows, intervening oversold rallies notwithstanding.

Global Equities: Our regional cumulative advance-decline lines have recently made all-time highs in North America, Europe, and the Pac Rim. Although the a-d laggard, Latin America, is some distance from its all-time high, it is at a 52-week high.

Interest Rates: Ten-year yields decisively broke down from a trading range that had been in force since early February. On the surface, this allows for a measured move to 2.36%-2.35%. However, for some time we have been pointing to 2.47-2.45% as an important band of support and, despite the breakdown,...
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