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fib_1618

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Please note that the time scale has been adjusted this week to provide greater analytical value moving forward.

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Since we are currently "oversold" on many of the McClellan Oscillators that we follow, no less seeing that we are either at or just below major rising bottoms lines on all of the breadth data shown below, along with the Thanksgiving holiday, next week will probably provide some additional choppy behavior as the market participants battle it out for near term supremacy.

Or we'll just rally 3% as an equal and opposite reflex to the previous weeks hard decline!

Quite a holiday week to be sure, with Friday's low volume advance providing a final dagger in the side of the staunchest bear. But was this something more than just a reflex rally? Maybe our tradable bottom coming in 3 weeks early? Let's take a look around.

The NYSE Composite advance/decline line bounced right off its longer term advancing trendline with quite a bit of vigor giving us a nice spike bottom and bringing us back to pre-election day levels. As long as this rising bottoms line remains intact, the larger path of least resistance remains higher overall.

Looking at the NYSE Common Only advance/decline line, however, we see that we are near in completing a simple snapback to the declining tops line shown on the chart. With both the SPX and DJIA having also completed technical snapbacks of their own with last week's rally, the expectation for the short term would be for another move lower from here to provide better synchronization between common stocks and the broader market indices that make up the New York Composite Index.

Moving to the interest rate sensitive data, and we see that both the NYSE Preferred and Bond CEF advance/decline lines closed the week at new all time highs, while the NYSE Specialty and REIT advance/decline lines showed good participation in last weeks advance. As long as these liquidity sensitive money flow lines remain firm, it not only tells us that any capital that's available for investment is still ample enough to provide price support, but it also promises us that we should see high price highs in the not too distant future as a direct result.

Gold itself had a good week, but not nearly so with the Precious Metals and XAU advance/decline lines which remain stubbornly below their declining tops lines shown on the charts. Until this lack of money flow leadership changes, any further advance in the price of precious metals, in general, should be looked upon with a cautious eye.

Finally, the international markets moved in lock step with the U.S. market's bounce with the FTSE advance/decline line coming up just short of moving to new all time highs, while both the DAX advance/decline line, and its price structure, were only able to rebound to their declining tops lines seen on the chart. Given the apparent leadership shown in the U.S. markets over the last couple of months, the expectation for now is for these markets to continue to mimic our short term gyrations.

In summary: although a technical bounce was expected last week, the bulls still have some work to do before a constructive technical structure can be completed so that an advancing price trend can then be created. As mentioned in the chat room on November 15th, when the McClellan Oscillator moves to deeply "oversold" levels as it did that day (-92), important price lows are usually to be expected. With the ensuing "hammer stick" that was created on November 16th on many of the index charts we follow suggesting a wash out of sellers, some additional backing and filling is all that will be needed now to provide this same internal base from where prices can again trend higher....a tradable low that is likely to come from trading range, and remains to be expected sometime in the middle part of December.

Have a great week of trading!


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