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fib_1618

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So with the BETS coming in again with a -75 "sell" reading this week, the expectation for stock prices remains with a negative bias for the next several weeks in spite of any pauses that we may see near term. Any further improvements in the MCO's early next week to above their zero lines would then provide us with a short term correctional sequence, in the form of a trading range or triangle configuration, that would probably extend into the first to second week of February. Because of this, let's continue to maintain a defensive posture toward equities for the near term, with the ongoing cadence of choppy, volatile sessions providing fluid "hit and run" trading opportunities for day traders, while we wait for further information of what we're likely see for the rest of February and going into the beginning of March.

After a highly indecisive week of back and forth action, the buyers finally "bellied up to the bar" on Friday to give the major market indices their second straight week of gains by an average of 1.92% from last Friday's settlement, with both the small caps and mid caps leading the charge higher by just over 2.30%, while the NASDAQ Composite was only able to muster a .50% gain. For the month of January, the major market indices were able to cut their mid month price declines significantly to an average loss of "only" 5.91%.

Looking over our breadth charts array for this week shows that the NYSE Bond CEF advance/decline line was again able to move to new all time highs on Friday while interest rates on the 10 year note saw their lowest levels since April of 2015. As we all know all too well, as long as money flow continues to be positive for the NYSE Bond Closed End Funds, interest rates will remain accommodative for the unforeseen future, while at the same time, equity prices will be cushioned by any bearish ambushes. Also showing good constructive money flow sequences are the NYSE Preferred and Investment Grade Bond advance/decline lines as both suggest that, overall, money continues to favor areas of investment that tend to keep risk at a bare minimum. Also of "interest" is the Junk Bond advance/decline line which closed just perceptively above its intermediate term declining tops line going back to the November of last year. Any further positive action there would have bullish implications for equities as we go into the 2nd quarter of 2016 as this would suggest that liquidity levels would be ample enough for stock prices to construct and maintain an advancing price sequence.

Speaking of rising liquidity levels, we also saw that the precious metals stocks got their second wind this past week with the XAU advance/decline line showing a robust week of cumulative buying, while the broader based 53 stock Precious Metals advance/decline line came within 7 net advancing issues short from moving above the highs seen on January 7th. With the upside price target for gold given back in mid December to around the 200 day EMA met this past week, this new round of strength in the metals issues suggests that this EMA level should see an aggressive challenge once we have a brief pause to regroup next week. It will also be important to see the metals, and silver in particular, participate fully with any probe gold may make above its 200 day EMA or our upside price target to around the $1140 level (which is now the 50 week EMA) will likely be a short term termination point of the current advance from the beginning of this year.

So with this week's BETS moving sharply higher to a -30 reading, along with the various breadth and volume McClellan Oscillators we cover in the chat sessions showing good textural advances over the last couple of weeks, we can once again take a less aggressive stance in our short term bearish expectations by applying critical stops to any open short positions. However, with the lack of uniformity in seeing all of the breadth and volume MCO's moving to new highs on Friday, we remain in a correctional sequence that will continue to see choppy, volatile behavior for the upcoming week. Because of this, intermediate term investors should consider sitting in their hands and watch the action from the sidelines, while short term traders continue to play last week's game of "hit and run" while we wait for January's jobs tally and finding out whether 4th quarter job creation was just a passing fundamental anomaly or not.

Have a great trading week!

US Equity Markets:

[breadthspx012916]


[breadthdjia012916]

[breadthspec012916]

[breadthpre012916]

US Interest Rates:

[breadthtnx012916]

[breadthig012916]

[breadthjunk012916] 

US Real Estate:

[breadthreit012916]

Precious Metals:

[breadthpm012916]

[breadthxau012916]

Australia:

[breadthaus012916]

England:

[breadthftse012916]

France:

[breadthcac012916]

Germany:

[breadthdax012916]

India:

[breadthbse012916]

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