Oct 11, 2015 Weekend Market Comments

I have noticed all the publicity and controversy about the Zweig Breadth Thrust. But don't confuse that with the McClellan Summation Index. The SI only exhibits a strong uptrend when the McClellan Oscillator stays positive, and preferably at or above 30, for a sustained period of time. And that is hard to do because, by it's construction, the McOs loses points easily when it is at a high level. The McClellan Oscillator, having risen to a high of 95.5 on Thurs, Oct 8, declined to 88.73 on Friday even though the A-D line posted a +419. The Summation Index has risen to it’s highest point since early June, 2015. The ZBT can just burn out like a shooting star and fail to sustain it's upward momentum. That is why I have said to watch the SI to see if it enters a real medium-term uptrend.
Also significant was the strength of the DJ Transports Friday and for the past week as a whole, The weekly gain of The DJT was 4.82%. The SPX has cleared it's 50-day MA convincingly, but the small and mid-cap indexes, especially the growth indexes, have not done so.

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

Wed Oct. 7, 2015 Dow Up 122: Technical Battle at 50-Day MA

Today market action continued the struggle between buyers and sellers at the 50-day MA of the Dow and S&P 500. Chart wise this is occurring on the upper right side of a W shaped bottom. The NYSE A-D line has put in a strong performance on Tuesday, Oct 6 with a +336 posting in the face of a sharp sell-off in the mid and small-caps, especially the growth stocks. The 16 point rally in the SPX and 122 point increase in the DJIA on Wed, Oct 7 was accompanied by a remarkable +1715 plurality on the NYAD.
The McClellan Oscillator recorded a 77.7 reading, creating breakaway gaps to the upside in the NYSE Summation Index. If the A-D line can continue it's current strength, it will generate a clear and unequivocal uptrend in the NYSI. A strong Summation Index rally is as close as it comes to a silver-plated guarantee of a powerful and long lasting intermediate term rally in the price indexes. That goes for the NASDAQ Summation Index as well.

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

But the bulls must overcome tenacious overhead resistance at the 50-day MA of the major indexes as they approach it from below. The Chart of the NYSE Composite very clearly shows the overhead resistance exerted by the 50-day MA:
http://stockcharts.com/freecharts/gallery.html?$NYA

Monday, Oct 6 2015 Market Action

Double bottoms have been put in, not surprisingly, by both the NASDAQ and DJIA as well as the SPX, as mentioned in Tony’s update. All three of these indexes may consolidate on the upper right side of this W shaped double bottom. That hesitation could draw in unbelievers looking for an opportunity to sell, thereby creating some fear and skepticism. But this market might become powerful enough to move straight up out of the W-shaped low before consolidating it’s gains.

http://stockcharts.com/freecharts/gallery.html?$INDU
http://stockcharts.com/freecharts/gallery.html?$COMPQ

The daily NYAD produced a powerful mega-plurality with a + 2372, after having put in +1590 days on Wed and Fri. The weekly NYAD stopped it’s descent nicely above it’s Dec 2014 lows of 387K on Tue, Sept 29 and has been moving up sharply (for a weekly chart) since then.

http://stockcharts.com/freecharts/gallery.html?$NYAD
http://stockcharts.com/freecharts/gallery.html?$NAAD

The Russell 2K put in a strong showing with with a +2.47% performance. If the R2K continues increasing in strength in tandem with the A-D ratios of the NASDAQ and NYSE, they would be manifesting behavior more typical of an Elliott Wave Primary 3 Wave than a Primary 5 Wave.

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

With today’s strong A-D action, the NYSE McClellan Oscillator shot up to a +58.07 and the NASDAQ McClellan Oscillator, responding to the +1564 of the NASDAQ A-D line, moved up to a +33.66.

http://stockcharts.com/h-sc/ui?s=$NYA&p=D&yr=3&mn=0&dy=0&id=p83733137120
http://stockcharts.com/h-sc/ui?s=$COMPQ&p=D&yr=3&mn=0&dy=0&id=p44465978337

Aug-Sept 2015 Correction Over

The daily NYSE A-D line has made a probable double bottom at about 89,000 and has been moving up smartly from that area. http://stockcharts.com/freecharts/gallery.html?s=%24 NYAD

The NYSE McClellan Oscillator, a derivative of the A-D line has created a sharp uptrend line from -105 through a rising bottom at -45.
http://stockcharts.com/h-sc/ui?s=$NYA&p=D&yr=3&mn=0&dy=0&id=p83733137120

I would like to see high plurality days in which the A-D line exceeds +1500 and even +2000. We have seen two such  breadth power days since the 1872 SPX intraday lows on Tue, Sept 29. On Wed, Sept 30 the NYSE A-D line posted a +1585 and on Fri, Oct 2 a  +1590. I would like to see some 2000+ days, but if we are in Elliott Primary Wave 5, they might be rare because in the final stage of a bull market the majority of stocks typically lag the large caps in performance.
That raises the question of how far we are from the end of the bull market. If we are in Elliott Primary Wave 5, then we might not be entitled to expect +2000 plurality days in the NYSE A-D line. If we are in a degree lower, such as Major 5 of Elliott Primary Wave 3, then we should expect some mega up days for the A-D line of from +2000 to +2500.
On the same subject, the S&P 500 suffered a maximum decline so far of 12.55%, which is low for a Primary degree decline. The Principal Mid-Cap Growth Fund has only lost 12.24% to date during this decline. If this correction were destined to go longer and lower, then undoubtedly greater percentage declines would occur for most indexes and funds. But it appears to me that that is not going to occur; I believe for the reasons explained above that we are in an impulse rally mode of a wave of some unresolved degree. We should be on the alert for a Zweig Breadth Thrust, especially if this rally is at an earlier stage than Primary 5.