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With many of the breadth and volume McClellan Oscillators seeing solid "oversold" readings on Thursday, and the NYSE TRIN seeing a reading of 1.98 on Tuesday, the expectation for next week is for the markets to continue to firm as we see the MCO's snapback to or toward their zero lines. After that we should see another quick pullback which will probably time itself to completion in and around this month's OPEX which is due on May 20th.
After relieving its "oversold" condition on Monday and Tuesday, the equity markets spent the rest of week backing and filling the vacuum created by this same reflex rally, and we wound up closing lower by an average of .87% from last Friday's price settlement, with this weeks weakness being led by the S&P Small Cap 600 Index as it shaved off 1.55%. Looking over our breadth charts array for this week shows that the majority of the weakness right now is showing up in the NYSE Common Only advance/decline line, as well as, the NASDAQ advance/decline line that can be seen in the cumulative charts review. On the flip side, the interest rate sensitive issues continue to show strong cash flows as suggested by the NYSE Bond CEF and NYSE Preferred advance/decline lines as their angle of ascents remain at better than 45 degrees to the upside. It's no wonder then that the NYSE Composite advance/decline line itself is moving net sideways right now as it reflects the created valuation balance between these two warring factions. Over in the metals market, both the Precious Metals and XAU advance/decline lines continue to attract investment capital, and this is helping to maintain their strong rising trends. This same strength in Earth commodities is also boosting both the Canadian (see cumulative charts) and Aussie advance/decline lines as they're showing higher highs as well in their respective pattern structures. This ongoing potency also continues to support the BSE advance/decline line, while over in Europe, the DAX advance/decline line has shown remarkable resilience in spite of the weakness seen in the CAC and FTSE advance/decline lines over the last couple of weeks. Taken together then, it would appear that all four of the major asset classes (metals, commodities, debt and equities) continue to be propped up by massive amounts of cheap money around the world, and this should help keeping global stock prices from moving lower in any important way for the unforeseeable future. So with the BETS losing some of its underlying strength this week as it came in with a +40 reading, we're now at a point where our accumulations of the last several weeks should be put on hold while we wait to see how next week is going to go as we move into this month's OPEX period. Given that we're out of sync currently between many of the McClellan Oscillator's and their components, along with the ongoing heaviness in the NASDAQ issues, the expectation for next week is for choppy, volatile behavior as both sides begin the familiar dance of who is going to take control of the action. With the added likelihood that current daily momentum divergences on the MCO's are going to remain intact based the strength we see in the interest rate sensitive products, the forecast remains that once next Friday is passed, the market environment will go back to being much more friendly to the buyers as we move into the 3 day Memorial Day holiday weekend here in the United States at the end of the month. 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