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fib_1618

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So with the BETS climbing back into neutral territory, and many of the domestic and international breadth MCO's showing an impressive amount of resiliency even with all the talk of monetary tightening here in the United States, let's go back to a more neutral approach towards stocks as we come out of the gate on Monday and allow the market's rhythm dictate if this new found clarity on rates is enough of a spark to continue the drive of investment capital into the market to challenge the summer price highs or, as we presumed last week, a 2/3 week period of digestion of the 6 week advance is indeed needed before we move into the holiday season.

OK...got it...check.

In what will probably be looked back upon as an important turning point, the sellers took full control of the market action last week as they pushed the major market indices sharply lower by an average of 3.91% from last Friday's close, with the NASDAQ Composite (-4.26%) and the Small Cap 600 Index (-4.59%) leading the broad based sell off.

With our breadth charts time scale adjusted this week to provide better interpretive value moving forward, we currently see that the NYSE Composite, NYSE Common Only and NYSE Specialty CEF advance/decline lines are once again leading prices to the downside, while the interest rate sensitive issues that make up the NYSE Preferred and NYSE Bond CEF advance/decline lines continue to be supported in spite of any FED tightening that we might see in December. Looking further in the interest rate area and we note that prices in the HYG index is leading the High Yield advance/decline line to the downside which would indicate that some sort of reset in this price to breadth relationship is likely to be seen going into next week. Although all of this would indicate some sort of early week reflex rally higher from the current "oversold" levels that we see in many of the breadth McClellan Oscillators (especially in the debt investment class as a safety allocation play), last Friday's attacks in Paris are likely to cause an emotional knee jerk reaction as we open up on Monday morning before these breadth dynamics take their full effect. However, with the NASDAQ breadth McClellan Summation Index not being able to move above its zero line, as well as, the Ratio Adjusted NYSE Composite breadth McClellan Summation Index failing to stay above the important +500 level after October's market advance, our anticipated back and fill of a week ago going into this month's OPEX period has now evolved into something much more important in the longer term price sequence...that of the development of a bearish trend in prices compared to that of being just corrective in nature.

Looking over in Europe and we can see that both the CAC and DAX advance/decline lines had already broken below their rising bottoms lines before Friday's massacre, so a hard decline right out of the gates on Monday would not be at all surprising while taking the FTSE advance/decline line with it. Over in India, the BSE advance/decline line remains in a rising configuration with plenty of room to join in any global sell off we might see early next week and still remain constructive. Meanwhile, as we look "down under", the Aussie advance/decline line is beginning to move lower now as the commodity markets (with the precious metals in particular) continuing to add to the downside pressure. Overall then, a global sell off early next week looks quite promising before we'll see the buyers attempt to take a stand and stabilize things...before bids are withdrawn altogether, and turning this into something more major.

There were no real interpretive changes in the precious metals arena last week as the market digested the large losses taken just the week before. With the Precious Metals and XAU advance/decline lines both making new all time lows as of Thursday, our overall defensive posture is best maintained even though there may be some near term buying of gold early next week as a responsive reaction to France's decision on Friday to implement Martial Law, no less, other policies we might see by other countries to keep things in check both in Europe and abroad. 

So...with the BETS moving from neutral to a solid sell signal in just one week, along with many of the major market averages (such as the New York Composite Index) failing to move above their 200 day EMA's over the last 2 weeks, and many of the breadth and volume MCO's breaking below their late September low points, it now appears that we're not only heading lower, but a full on challenge of the August price lows is now highly probable. Because of this, a full defensive posture is now warranted. The important thing to watch for early next week is whether or not the end August "flag" lows in the various MCO's holds or not. If it holds, then any break of the August price lows during this sequence is likely to provide bullish divergence on both the short and intermediate term time scales. Alternately, any break of these same MCO August lows, and bear market conditions would be underway that will probably last for the next 6-9 months.

Have a great trading week!

US Equity Markets:

[breadthspx111315]


[breadthdjia111315]

[breadthspec111315]

[breadthpre111315]

US Interest Rates:

[breadthtnx111315]

[breadthhigh111315] 

US Real Estate:

[breadthreit111315]

Precious Metals:

[breadthpm111315]

[breadthxau111315]

Australia:

[breadthaus111315]

England:

[breadthftse111315]

France:

[breadthcac111315]

Germany:

[breadthdax111315]

India:

[breadthbse111315]

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