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From the April 25th update:

With next week bringing T-Bill auction results, another Fed meeting, along with the monthly Government jobs numbers, the expectation is for continued choppy behavior as the market goes about its business of constructing a foundation that would be strong enough to support an advancing price sequence.

It's been an interesting 3 weeks since our last breadth chart narrative, and since that time, all of the major market averages are up less than 1% except for the small caps which have lost 1.6% in this same period. Overall then, the major market indices are down 1.27% on a week to week basis since April 25th though breadth of market in the United States remains in rising trends except for the NASDAQ Composite and Small Cap 600 advance/decline lines which broke their advancing patterns in the last two weeks of April.

Looking over the breadth charts array for this week and we continue to see that they all remain under the influence of their longer term rising bottoms lines that have been controlling their structural patterns since last year. The interest rate sensitive advance/decline lines in particular continue to show tremendous amplitude to their upside progress as the NYSE Bond CEF, NYSE Preferred and NYSE Specialty advance/decline lines all closed at new all time highs on Friday while the NYSE REIT advance/decline line moved to new all time highs on Monday before easing off the rest of the week. As we have noted so many times in the past, as long as the A/D lines of the interest rate sensitive issues continue to make higher highs, this PROMISES us that we will see higher equity prices in the not too distant future.

Speaking of interest rates, the yield of the 10 year note all but met its downside target objective this past week as we made it to 2.502% with Thursday's trading...a target objective that was given with the 12/27/13 review. Now that this target has been met, we'll have to watch see if the NYSE Bond CEF advance/decline line tops out here or if it will continue to climb higher. As was the discussion back when we last visited the lower end of this ongoing trading range back on 10/18/13, any break below the 2.45% level would then open the door for yields to decline all the way down to around 2.15%. Stay tuned.

Meanwhile, both the DAX and FTSE advance/decline lines continue to rise on the support of their longer term advancing trends as both challenged their all time highs this past week with the FTSE successfully reaching new high ground. Price wise, the DAX made new all time closing highs in prices this past Tuesday while the FTSE moved to within 52 points of attaining this same goal. With the rest of the global markets showing great buoyancy over the last 3 weeks, this is another good sign that once the US markets are able to build a more solid internal foundation that we'll see new all time price highs here as well.

There was some good news this week in the precious metals complex as the 56 Precious Metals Stocks Bullish Percent Index ( ) turned higher on Thursday, but this comes with both the Precious Metals and XAU advance/decline lines continuing to make lower lows. As we move into the apex of the triangle shown on the BPI chart, the BPI might be saying that we're in the process of creating a bottom, but the A/D data suggests that this bottom won't likely happen until gold breaks to the downside out of its compression sequence. For the Elliottician's out there, we're most likely in a small (triangular) "B" wave with "C" down approaching to complete the counter trend from the December 2013 lows. It will therefore be important for these advance/decline lines to start diverging on any kind of weakness we might see in the price of gold and silver short term, and hopefully we'll have a better longer term handle on whether we're creating a bottom or likely to collapse to just below the $1000 level on gold next week.

All in all then, the equity markets continue to digest the large gains of 2013 as prices remain buoyant overall which might indicate that traders believe that prices are still fairly valued. With the large caps taking the blunt of the weakness this past week, it would appear that the market is now attempting to right the inconsistencies we've seen over the last couple of months between the growth area and those issues that represent value. As long as this current constructive behavior continues next week, the expectation from here remains for higher equity prices overall per the historical indication in the interest sensitive issues, no less, the continued strength in money flow we're seeing on a global basis.

Have a great trading week!

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