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So with the lack of any bullish follow through after Wednesday's strong reflex rally, the market's stability has now been called into question on a near term basis. With the NDX, OEX and Dow breadth McClellan Summation Indexes now within 2-3 market days away from probably moving down and through their zero lines, we now have to be on guard for a "crash like" capitulation event taking place over the next 2 weeks that will probably meet all of our downside price targets that have been given previously.
The continuation of the "crash like" event that extended into the first 3 days of the week provided quite a bit of excitement, but after all was said and done, the major market indices actually closed by an average of .13% with the S&P 600 Small Cap Index leading the charge higher by 2.26%, while the Russell 2000 index reversed sharply after Monday's bottom and closed up 2.75% for its first weekly gain in seven. For the week from the release of the FOMC Minutes on Wednesday, October 8th, to Wednesday's intraday lows on October 15th, the average loss for the major averages was exactly 5% although for most it "felt like" more than it was. UP Taking our weekly review of the breadth data and we first notice that the NYSE Composite advance/decline line "magically" found support on its longer term rising bottoms line from October of last year and bounced higher into Friday's close. With the NYSE McClellan Oscillator showing a lessening of downside pressure and then breaking above its declining tops line on Friday (see cumulative charts), along with NYSE McClellan Summation Index now at its lowest levels since the summer of 2011, this would then indicate that a great majority of the selling for this corrective sequence is now behind us and that the process of attempting to create an internal base, from which prices can rally, is now underway. Looking next at the NYSE Bond CEF advance/decline line, and we see that it remained buoyant during this past week as it just missed by 51 net advancing issues from moving to new all time highs at the end of the week. This same chart also shows that our longer term technical target for the 10 year note of 2.15% was finally met mid week on the back of panic selling in equity markets which ultimately pushed yields all the way down to 1.87% intraday. With the NYSE Preferred advance/decline line also within striking distance of moving to new all time highs, it will be important for the bulls to see the interest rate sensitive issues that make up the NYSE (including the REITS and Specialty CEF's) to continue to show good money flow characteristics to help out in this building process, and by extension, push the NYSE Composite advance/decline line to new highs of its own. Moving to the Precious Metals and XAU advance/decline lines and they pretty much stood their own ground during this past weeks equity capitulation which would be good news if we can now build on this over the next couple of weeks. However, with the Aussie advance/decline line still showing weakness, the lack of silver following gold's 5.6% gain over the last 2 weeks, and our still having downside price targets in gold to around $1100 still yet to be met, it wouldn't be too surprising to see last weeks buoyancy in the metals stocks give way to new lows first before we'll likely see a bottom in these money flow components and in this asset class overall. So, as we had expected for the last month or so, the equity markets have had a time of it so far during the month of October as they continue their choppy, volatile correctional sequence as the longer term uptrend sees its first real test in just over 3 years. With many of the large cap breadth and volume McClellan Oscillators making new lows this past week, while still others continued to make higher lows during this same time, next week will probably be just as volatile as the market participants begin the process of backing and filling in a fight for control of the ongoing longer term trend in prices. At this time, and without seeing new lower lows in these same MCO's, it would still appear that our time window for a tradable low will come around Election Day here in the United States, November 4th. However, if the sellers can again push the action to produce lower lows in these same MCO's, this would then give us another round of pushing and pulling for the rest of November, where the earliest window of opportunity for the buyers wouldn't come around until after the Thanksgiving Day holiday on November 27th. Have a great trading week! US Equity Markets : US Interest Rates : US Real Estate : Precious Metals: Australia: England: Germany: __________________ Dave's LinkedIn Profile Technical Watch Twitter Page Technical Watch Facebook Page "As for it being different this time, it is different every time. The question is in what way, and to what extent" - Tom McClellan "An economist is someone who sees something happen, and then wonders if it would work in theory" - Ronald Reagan "What we see depends mainly on what we look for" - John Lubbock "The eye sees only what the mind is ready to comprehend" - Henri Bergson “Answers are easy; it’s asking the right questions which is hard” - Dr. Who - 1977 "You know the very powerful and the very stupid have one thing in common - they don't alter their views to fit the facts, they alter the facts to fit their views (which can be uncomfortable if you happen to be one of the facts that needs altering)" - Dr. Who - 1977