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With many of the trending oscillators that we use to measure the amplitude of money flow showing a mixed picture on Friday, it's likely that we still have some additional backing and filling still yet to be done before we can call the corrective process from the mid August highs to the crash lows complete. With the rhythm of the markets still highly volatile in this ongoing process, let's continue to look for this high degree of fluctuation to continue into next week as the intermediate term battle between buyers and sellers begins to take a more important role towards, what is hope to be, a tradable low that can last for a period of weeks instead of days at a time.

For the first time in 12 weeks the major market indices finally broke the back of their alternating week to week closes by again settling down, but this time, by an average of 1.58% as Friday's lack of being able to hold on to the early morning gains has now pushed stock prices back on its collective heels in preparation to Monday's opening here in the United States.

Looking at this week's breadth charts array and we see that cumulative money flow was leading the way to the downside this past week with the NYSE Composite advance/decline line reaching its lowest level since September 1st, while the NYSE Common Only and NYSE Specialty CEF advance/decline lines settled at their lowest levels since the crash lows of August 25th. Also showing a highly negative bias was the High Yield advance/decline line which continues to show a strong trend of money flow to the downside, with prices in HYG collapsing to its lowest levels since the 2nd week of December 2014. With the NYUD and NAUD cumulative volume lines (see cumulative charts) also seeing lower lows as well, this would highly suggest that prices will likely see downside follow through next week, with a full on challenge of the late August crash lows a high probability.

With all that said, there was some promising news this past week as the NYSE Preferred advance/decline line finished on Friday at new all time highs, while money flow into the NYSE REIT advance/decline line remains buoyant after breaking above its intermediate term declining tops line last week. This would support the idea that higher yielding equity products continue to be favored in the current trading environment. Interest rate wise, the NYSE Bond CEF advance/decline line continued to move higher within its rising trend channel from the June 29th low point. Taken together, it would appear that although money is moving out of equity products that have their valuations based on current and future earnings, it's also saying that high dividend issues remain an attractive alternative in an environment in which monetary policy remains somewhat indecisive.

Speaking of the direction of interest rates, the precious metals market continues to provide a mixed picture with both the Precious Metal and XAU advance/decline lines far from confirming the recent rise in both gold and silver over the last couple of weeks. In fact, both of these money flow lines moved to new all time lows on Wednesday the day before gold's largest one day gain since May 13th, and its first 2% plus gain since January 15th's break above the 200 day EMA. This now sets up a powerful non confirmation between cash prices in the precious metals and cumulative breadth in the precious metals stocks with a heavy emphasis for a downside resolution likely to take place in resetting this dichotomy between the two.

Looking overseas and we see that we have a mixed picture there as well as the BSE advance/decline line continues to ignore the global weakness in stocks right now, while the Aussie advance/decline line continues flailing in the hope of not drowning to new all time lows. Meanwhile, over in Europe, we see that prices in France's CAC and Germany's DAX indexes moved to new 9 month lows without seeing confirmation in their respective advance/decline lines. This inconsistency in having price leading breadth will now have to be remedied near term...either with prices rebounding strongly back above their late August lows, or by breadth moving sharply lower in an effort to correct this conflict between the two.

So another week has now come and gone with very little in the way of expected changes to be seen for next week as high volatility is likely to continue. With the BETS moving back to a -70 "sell" reading on Friday, along with Friday's "failure to succeed", the market is now fully primed for some sort of downside capitulation to take place as early as next week with the backdrop of Fed Bank Presidents, Governors, and the Chair herself scheduled to speak. Mix in a pinch of ADP, a sprinkle of Jobless Claims, and a dab of Unemployment data, and we could have quite a week of trading coming up as all of this is mixed together. Whether we'll get our expected tradable bottom in early October out of this is still up in the air, but we should have a pretty good handle on this next weekend as to whether we have a "go" or not.

Seat belts fastened? Good.

Have a great trading week!

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