Registered: 1101777014 Posts: 4,722
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Because of this, let's allow the market to "show us" what its true intentions might be before committing our capital, and remaining defensive overall until we see better constructive evidence to the contrary.
Whether you're a bull or a bear, been watching the markets for 1 year or 30, you really have to love the last couple of months of trading with the action as remarkable as we've ever seen it...wow!! Rocketing higher like a Roman candle at a July 4th celebration, the U.S stock markets had a historic week of trading as the major market indices closed up by an average of 3.77% from last Friday's hard intraday reversal, with the Small Caps exploding to the upside by 5.05%, and the NASDAQ Composite bringing up the rear with a gain of "only" 2.61%. As you might have expected, breadth of market also had a super week as a tsunami of money moved back into all sectors of the US markets with a vengeance, and this pushed a great majority of those advance/decline lines above their declining trends of the last 3-5 months. The lone exception to this in our array of charts comes with the NYSE Common Only advance/decline line which still remains below this same line of negative influence which is usual and customary when the trend initially moves from down to up. The interest rate sensitive issues, in particular, had a great week of sponsorship as they all moved above their resistance levels and are now leading prices to the upside. Of special note comes with the NYSE REIT advance/decline line which continued to move sharply higher after finding snapback support at the end of September, and least we forget to mention, the High Yield advance/decline line which was finally able to break the back of its declining trend. Yes, it was a week of "constructive evidence to the contrary", and when we add to this the fact that this week's BETS number moved sharply back into a "neutral, cash position" reading of -15, our defensive stance toward the markets, of which has served us well since late July, seems to be no longer applicable. Over in the metals markets, the Precious Metals and XAU advance/decline lines also had a good week as both were finally able to break above their declining trends of resistance. However, both of these money flow lines continue to lag in their performance when compared to either the price of gold or the current price levels of the XAU respectively. Because of this divergent relationship between breadth and price, along with the price of silver having its issues in not being able to break above its 200 day EMA, this continues to suggest that although this asset class is showing better signs that an important bottom might indeed be behind us, we still need to see a bit more "under the hood" tweaking before an uptrend is likely to get started. So let's look for some additional backing and filling again next week to correct the current inconsistencies between internal and external, and at the same time, let's now step aside from our multi month defensive posture for now and see how things evolve moving forward. Looking overseas and we see that the FTSE advance/decline line was able to participate nicely with the US markets as it moved above its declining trendline this week, while the Aussie, CAC and DAX advance/decline line made excellent progress in joining in with this same accomplishment. Over in India, the BSE advance/decline line continued to lead the global markets to the upside and now is within 782 net advancing issues of reaching its August 5th high point. As long as this barometer of the emerging markets continues to move to higher highs, along with the NYSE Preferred advance/decline line leading higher here in the United States, this should help in providing overall price support for the global markets for the rest of the month of October. So...it was an outstanding week for the bulls as fresh money finally came off the sidelines and propelled many of the McClellan Oscillators to multi year highs with this effort. Because of this, we can now take a more friendly approach towards equities for the next couple of weeks as we attempt to work off these near term highly "overbought" readings. For added convenience, there are 3 sectors currently that show their breadth advance/decline lines moving to new all time highs this past week: Consumer Staples (XLP), Financials (XLF), and the Utilities (XLU). Keeping a close eye on these sectors should then provide us with additional counsel as to what to expect over the next couple of months, no less, give us a good starting point as to where money is finding to be the most attractive areas with respect to valuations. Have a great trading week! US Equity Markets : US Interest Rates : US Real Estate : Precious Metals: Australia: England: France: Germany: India: __________________ 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