Will Rally Extend Before Larger Correction?

The McClellan Oscillator has remained positive during this pullback and thus the Summation Index has continued to post positive gaps. If the McOs does not decline further and then the A-D line posts some +1000 to +1500 days, there would be support in the SI for a 9 wave minute 3 of minor 3 of intermediate 3 of major 5 (Elliot waves). Any further weakness from here would nullify that possibility and confirm Tony Caldero's preferred scenario of an $SPX decline to the 1929  pivot, with my $RUT projection being 1143 (based upon my Mon, June 9 post).

 http://stockcharts.com/h-sc/ui?s=$NYA&p=D&yr=3&mn=0&dy=0&id=p83733137120

A-D Line, McClellan Oscillator, & Summation Index June 6, 2014

    The A-D line posted two consecutive very strong days: +1731 on June 5 and +1473 on June 6. This resulted in the McClellan Oscillator rising to 35.72  with the Summation Index breaking above it’s high-level base when it cleared 850 and with it now moving up towards it’s early March high of 1050. The SI has moved up in a series of fits and starts but has created a definite uptrend. We'll see if it has enough power in it to reach the March high without making a short term correction first.         
    In the meantime we can look at the relative strength chart of the $RUT vs. $SPX.  Here is a link to the chart of $RUT : $SPX for June 9: 

http://stockcharts.com/freecharts/gallery.html?%24RUT%3A%24SPX

   It has broken above it’s downtrend line and might come down to back test it on any correction. I am thinking the RS ratio would have to move higher before it did fall back to the downtrend line, however. I am not a paying member of Stockcharts so I cannot draw in a trendline. You’ll have to use a soft straight edge on your monitor screen. That means the $RUT price would be about .5950 to .5930 x whatever the $SPX is at the time it touched it’s downtrend line from above.

   To have forecasting value, you would have to estimate what the $SPX might be when the RS ratio hit the .5950 – .5930 range (I am talking about a short-term correction here). But that would be an easier task than estimating the more volatile $RUT price. The $SPX closed at 1928 on the day it broke above the down trend line. By watching the $SPX as the RS retraces to the downtrendline (say at .5940), we might estimate to within a couple of points where the $SPX would touch it, and using the RS ratio value, calculate where that would be for the $RUT.

Using the above method and guessing that the $SPX would be around 1924 when the RS approached it's previous down trend line from above, the $RUT value would be about .5940 * 1924 = 1142.86.  

Thursday, June 5 2014 Technical Action in the $RUT (R2K)

As I wrote on Wednesday’s OEW blog, the R2K needed to break above it’s 50-day MA. The 200-day MA and the 50-day MA were almost creating a symmetrical triangle in the apex of which the R2K was squeezed. The R2K ($RUT) punched decisively through the upper bound of this “triangle” (the 50-day MA) as well as through the downtrend line that Jedi showed us. Here is a chart of Thursday’s action:

http://stockcharts.com/freecharts/gallery.html?$RUT

Here is a chart of the R2K RS to the $SPX for Thurs. It made a nice upthrust out of it’s base but still has a lot of resistance points to get through, including it’s own 50-day MA.

http://stockcharts.com/freecharts/gallery.html?%24RUT%3A%24SPX

The NYSE A-D line turned in a nice +1731 plurality today, confirming the strength in the $RUT.