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Because of this, let's then continue to take a defensive posture toward the markets into next week, and remain so against the intraday price highs that we saw on November 2nd are taken out...from which an neutral stance would then become appropriate.
It turned out to be a rather flat holiday shortened week for the large caps here in the United States while the mid and small caps followed through on their impressive gains from the week before. When all was said and done, equity markets were up by an average of .65% with both the S&P 600 Small Cap Index (+1.96%) and the Russell 2000 Index closing above their highs from the beginning of November in this same effort. (+2.32%) Looking at the breadth charts array for this week shows that the NYSE Composite and NYSE Common Only advance/decline lines continue to show higher cumulative totals with strength in the interest rate sensitive NYSE Preferred, NYSE Bond CEF and NYSE REIT advance/decline lines helping the broad based composite to remain in its bullish configuration for the second straight week. This is good news for the longer term health of the market as when we see these interest rate sensitive issues moving higher, it us that we will also see higher equity prices overall in the not too distant future. With that said, however, we still have some inconsistencies going on right now where both the promises Investment Grade and Junk Bond advance/decline lines still remain in a weakened condition. With the idea of that the IG A/D line is more represented of bond prices, and the JUNK A/D line is more inline with equities, it doesn't look like that this "promise" will be fulfilled before we move into the middle part of December and the FED statement on December 16th and quarterly OPEX on the 18th. Looking overseas, and with the exception of the Aussie advance/decline line which is weighted with Earth resource commodities, the BSE, CAC, DAX and FTSE advance/decline lines all continued to strengthened even with the backdrop of rising political tensions in both Europe and the Middle East. This would then instruct us that monetary policy in both of these regions continues to provide tremendous flows of liquidity at this time, and that any investment excesses in the financial markets are finding their way into equities. As with the strength in the interest rate sensitive issues here in the U.S., this is also a very good indicator that the underlying strength in equities remains buoyant at this time, and this will continue to cushion any bearish surprises that might come about into the end of the year. Over in the precious metals asset class, the price of gold moved sharply lower on Friday and closing at its lowest weekly levels since February of 2010. However, when we look at the Precious Metals advance/decline line, we see that we have our first bit of bullish divergence between breadth and price in nearly 4 years. With our longer term downside target of about $985 now only $70 away, this divergence could finally be the beginning of the bottoming process that we've been looking for over the last 18 months. But before we get too excited on the potential of a tradable bottom, let's first see what happens next week as to not mistake Friday's divergence as being caused by light holiday trading. So with the BETS improving to a -40 this week, and our getting a mixed picture as to the timing of the next major move in prices, it's probably better to ease off of our fully defensive posture and take a more bearish bias approach to things as we move into next week where we have a whole menu of reports that should help to provide a defining answer as to what we will likely hear from the Federal Reserve two weeks from now. One side of the aisle says a raise in rates is still not likely, while the other is allowing for some incremental tightening. Whatever happens though, it would seem that there's still plenty of liquidity to keep prices from moving lower in any important way into the end of the year. Hopefully by this time next weekend, we should then have a better feel on what the 1st quarter of 2016 will provide for traders in what should be a galvanizing time in international politics. Have a great trading week! US Equity Markets : US Interest Rates : US Real Estate : Precious Metals: Australia: England: France: Germany: India: Technical Watch's Breadth Data Review includes a weekend recap of hard to find breadth measurements from the New York Composite Index, the London exchange (FTSE), the Frankfurt exchange (DAX) and Sydney's All Ordinaries index. Charts are provided with a market narrative by Dave Breslaw and are annotated for additional clarity and suggested positioning. Also included with this service are occasional special posts of longer term data charts to provide a comparable historical context of how internal action of the markets (money flow) can have a direct effect on the direction of price itself. This service works hand in hand with the Chatting the Market subscription service as it provides additional global money flow insights found nowhere else on the internet. More information on subscribing to either or both services can be found by clicking . here __________________ 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