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All in all, market conditions continue to decay as a marathon runner would show signs of exhaustion towards the end of the race. With the interest rate sensitive A/D lines continuing to promise higher prices in the future, the technical outlook after next weeks bounce would be for a test of the longer term rising bottoms lines that have controlled many of the A/D line structures since the 2009 lows.
OK, now that the bounce is behind us, let's take a look around and see how things are shaping up after Friday's volatile OPEX session. The NYSE Composite, Common Only, Preferred and Specialty advance/decline lines all made higher highs last week suggesting that if a correctional sequence is about to begin, we should later see higher price highs after all is said and done. This would then compliment these same expectations that have been shared by the NYSE Bond CEF advance/decline line as recently as last week. This past weeks rally also showed better than expected improvement in the short term trend of breadth and volume as indicated by the McClellan Oscillator's ability to take out its early October highs in many of the major market indices. It should also be pointed out that with Friday's hard price decline, we now have the potential of trend divergence in several of the breadth charts shown below where the A/D lines neither confirmed nor led this same downside charge by the bears. This may indicate that we may not need to test the longer term rising trend lines as was our expectation last week but may move within a sideways range to fulfill the expectation of a tradable top in this time period. While the NYSE Bond CEF advance/decline line continues to digest its tremendous gains of the last several years, the NYSE REIT advance/decline line continued to churn sideways while completing a simple snapback to what was its accelerated rising bottoms line. The expectation here still remains for a test of the longer term trend line going back to the November 2011 lows for the REITS, while the Bonds may continue to pause sideways to meet this same line of positive influence. The Precious Metals advance/decline lines remain on their sell signal from last week while fulfilling their technical obligation of simple snapbacks to or towards their just violated rising bottoms lines. As with the REITS, our expectation here is for some additional backing and filling in what hopefully will be another successful test of their longer term support lines marked on the charts. As with the cumulative NYSE breadth data, the DAX advance/decline line also moved to higher highs this past week showing better than expected strength given the continuing opinion of an European Union collapse, while the FTSE advance/decline line came up just short from making new all time highs. Given the buoyancy that both of these key Euro markets continue to show here, this shows great promise that once the bulls are able to catch their collective global breadth, that another attempt to push prices even higher is likely to be seen in the not too distant future. And finally for this week, Australia's All Ordinaries advance/decline line is now accelerating its move to the upside on the back of the more aggressive monetary policy provided by the Federal Reserve Bank. In fact, the Aussie breadth McClellan Summation Index ( http://tinyurl.com/9xxmv5z ) is now above its early spring 2012 highs suggesting that the current rally will be able to break above the trend channel shown on the linked chart, and challenge of the 2010/2011 double top highs is now in the offering. And if this MCSUM can break above the October 2010 highs, prices will then free and clear to make an effort to challenge the all time highs in this index seen in 2007 at around the 6700 level...about 2000 points away from current levels. Have a great week of trading! 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