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doc

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Reply with quote  #1 
Market behaviour after breadth thrusts as evidenced by the Zweig breadth thrust rules and NYMO spikes to around 90+. This is also supplemented by the % stocks in NYA and SPX above there 200ma (shout out to rotort for adding this component).


After the fantastic breadth thrust off the March 2009 lows from incredibly OS levels, we rallied wildly for over a year and then we got a correction from April to July 1 2010. We then got a Zweig breadth thrust in July 2010 along with a NYMO spike as part of an INITIATION THRUST kicking off a new IT rally. Note it originated after deeply negative internal lows on Zweig of 0.3 and NYMO -136 as well as from oversold external lows levels for the %200 of less than or equal to 30%.

KEY IS THAT the price high after the breadth thrust came 1-2 weeks after the peak of the breadth thrust (red down arrow). Another important point here is that after this initiation rally, there was a greater than 61.8% retrace before the IT rally took hold. In fact, NYMO got back down to -67 and Zweig to 0.4. Then came the robust rally.

Then after the top in May 1st 2011, the first correction down was bought with another breadth thrust, but rather than an initiation thrust, I call it a reactive thrust after the first move down from an IT top. The psychology of buying the dip is evident here after a long bull run courtesy of QE. The difference here is the divergence of the %200 with the retest of the price top after that reactive thrust.

Note again that there is a secondary price top 1-2wks after the internals top (red down arrow) which marks the best shorting opportunity before the major correction ensues. This led to a greater than 61.8% retrace of the whole enchilada rally off the July 2010 lows. We also got a reset NYMO flag at -142 and Zweig got down to .26! as part of the internal lows along with fully OS %200 readings.

That led to a new INITIATION THRUST in Oct 2011. Again the secondary price high was 1-2wks later in early Nov 2011 (red down arrow) marking a shorting opportunity. We again got a greater than 61.8% retrace of the initiation rally down to the Thanksgiving lows. This again took NYMO down to -106 and Zwieg to 0.33 and the %200 to the 20% range. It was then that the ensuing long bull run took effect courtesy of more QE.

This has now lead to the recent top April 2012 and the first correction down into the June lows. Off those lows, we got what I again refer to as a REACTIVE THRUST after the first drop off the highs. NYMO peaked at +100 early July and again, about 1-2wks later we get the secondary price high on Thursday July 19th (red down arrow) marking the next shorting opportunity. Again note that across the last 3 price peaks in the last 4 wks, there has been bearish divergence on the %200 for NYA and SPX.

What comes next? Well at a minimum, I expect a greater than 61.8% retrace of the rallly off the Jun 4 lows as mentioned 2 wks ago in the discussion with IYB et al (on TT). That would suggest the 1305-1310 area. Since this is a reactive thrust rather than an initiation thrust, also on the table though is a greater than 61.8% retrace of the whole enchilada off the Oct 2011 lows which targets 1200-1225 area on a closing basis.

Will history repeat itself? The internals have given me a map. Lets see if price will cooperate. Something to chew on. Enjoy and comments welcome.

http://stockcharts.com/c-sc/sc?s=$NYMO&p=D&yr=3&mn=7&dy=0&i=t14053905536&a=271408913&r=1342910284263


Might need to be a stockcharts sub to see all details off the link.


Doc

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doc

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Reply with quote  #2 
One other note. From a purists point of view, the reactive thrust off the June lows this year did not technically qualify as a Zweig BT as it did not meet the criteria within a 10 day period. Still, the NYMO did spike to over 90, indeed over 100.

Doc
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doc

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Reply with quote  #3 
Fib has not had a chance yet to chime in, but he might point out that looking at NYMO without considering the context of NYSI and the NYAD is, well, incomplete. In that vain, it should be pointed out that the NYAD cum breadth made a new all time high last week and the NYSI has made an upward move that is more similar to the INITIATION THRUSTS than the REACTIVE ones I outline above both in the amplitude of the advance as well as clearing the +500 "escape velocity" zone. So this should give one pause before blanketly accepting my initial points in the first chart above. No less the very low AAII reading of 22% bulls this week. There are always flies in the ointment, eh?

But a new ATH in the NYSI and achieving escape velocity on NYSI has NOT prevented sharp and even deep corrections as we saw and the charts presented 2 wks ago. More importantly the main ingredient missing in the bullish McClellan analysis is VOLUME. The volume component is sorely lagging, so in a sense, one might say the market is going up on fumes. Such can be summer doldrums. So until the volume components start confirming, we might at best expect choppy trading. But if volume comes back in, follow its lead as we will likely have a robust move in that direction. In that sense, some of the nasdaq indicators are coiled, ready for "a big move".

I have redone the chart above to include the NYSI. For now, I placed a green box around the latest thrust as it is similar to the previous INITIATION thrusts in character. I welcome additional comments to spur discussion.

ATB, Doc

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bobalou

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Reply with quote  #4 
Hi DOC,thx for your posts. could you put up your cycle work, I like an oct low
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doc

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Reply with quote  #5 
June 4, 2012 was the 40wk low
Expect the next 80wk low in Jan 2013 but could be Feb if cycles lengthen.

That means Sept-Oct should see a 20wk low, half way tween.
Maybe that is the Oct low you are looking for.

One thing to keep in mind is that as we move forward, these smaller cycles should be left translated, meaning earlier peaking. We may have already seen the highs for this 5 and 10 wk cycle, due to bottom in early August.

Haven't posted as much on Hurst as the last 80wk came in waaaaayy early in Oct 2011, was expecting Dec 2011. Cycles work best when there is less interfering with their natural ebb and flow. With the world awash in artificially high liquidity and money supply versus the intermittent and unpredictable pounding of national debt issues in Europe and here, cyclical action has been pushed to the background for the time being.

Doc
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