April 6 2014 Rally Day Within Consolidation Pattern

With an SPX close of 2066.66, we had a devil of a good up day today! Market participation was broad and inclusive. The NYAD line posted a +1550, NASADAQ line  a +1212. The Transport and Utilities sectors were the notable exception. My guess is that they are being negatively impacted by higher oil prices at this time. However, they did perform well earlier this year during the upward phase of the oil price action. So far, the overall market still appears to need a rising oil price in order to continue it’s uptrend. I remain moderately convinced that that dynamic may change soon, but, even if it doesn’t, I believe the bull market will still resume intact. However, I think we could yet see another little downleg to complete a micro ABC pattern on the $NYAD.
http://stockcharts.com/freecharts/gallery.html?$NYAD

April 3 Technicals & Fundamentals

The McClellan Oscillator needs to have some sharp up days to snap out of it's correction. When that happens, this market will surge towards ATH's. The breadth of the market is harder to pull up than the large caps in and of themselves. Therefore the strong A-D days that it will take to get the McOs rising sharply again will energize all the price indexes to the upside. 1977 and 2008 are the only times that I know of  that the A-D line was in a strong uptrend while the Dow declined.  And I am not even sure 2008 was a strong A-D uptrend or not. I wish someone with access to better charts than I have would post the A-D line and the DJIA for the 2008 time period and even the 1977 example.
The positive correlation that the oil price has had with the stock market may not continue. For the last year and a quarter the market has been discounting the negative effects of lower oil and gas prices on energy-related companies. The market may again start discounting the benefit of lower oil and gas on companies and individuals who consume them. In fact, it probably already started in Dec 2015 with the beginning of the Utility sector rally, although low interest rates have helped. But low interest rates are also an effect of low energy prices. This dynamic may cause different industry sectors to be leaders in the next segment of the bull market.
http://stockcharts.com/freecharts/gallery.html?s=%24NYAD
http://stockcharts.com/freecharts/gallery.html?$NYMO
The Transports rose steeply a couple of weeks ago but since then have declined much more sharply than the Industrials. They are a sector, like the Utilities, which obviously benefits from lower energy prices.  I am expecting the Transports to be co-leaders with the Industrials and NASDAQ in the next rally phase, if not to surpass the Industrials. The mid-cap growth sector, which is not an industry group, but a size and style group, have started to gain in relative strength. I am particularly interested in that market segment because I own a couple of mutual funds of that type,
There is much incredulity about the logic of a bull market continuing amid so many economic, financial, and geopolitical stresses. Being a bull does feel a little like going "over the top" of the trenchline into no-man's land with shells bursting all around and then climbing the wall of the enemy's fortifications in the face of machine-gun fire."Climbing a wall", yes, that is what we bulls must do: Climb a Wall of Worry. And "Climbing a Wall of Worry"  is what sustainable bull markets do as well.

Pivotal Market Interpretation on Feb. 15, 2016

The decline to Feb, 11 low at an intraday SPX price of 1810 and a closing SPX price of 1829 from the all time high of 2135 from the May 18-July 20 double top at 2135 and 2128 respectively was more appropriate in time and extent for a Primary degree down wave than the decline to the 1867 low or even the 1872 low were. A broad A-B-C pattern was etched out by the Primary 4 down wave. The A leg divided into an a-b-c starting from the July 20, 2015 top at 2128 and ending at the Aug 25 low of 1867. The b wave starting from 1867 divided into a 1-2-3 topping at 2021 on Sept 16, 2015 with the c-wave ending at the Oct 29 low of 1872 in a single wave decline,creating a double bottom.
From there a strong B-wave rally took the SPX to an eventual peak at 2081 on Dec 29, 2015. The double top pattern created by the Nov 3, 2015 and Dec 1,2015 highs of 2116 and 2104 respectively were the absolute highs of the rally. That could have been called a 5-wave rally with the 4th wave dividing into an a-b-c and the 5th wave peak at 2081 failing on Dec 29, 2015 to even match the Dec 1 high. From the Dec 29, 2015 peak of 2081 the C wave fell to 1810 (intraday) on Feb 11, 2016. The a wave hit it's low at 1812 on Jan 20; the b-wave peaked at 1947 on Jan 29; and the c-wave probably ended on Feb 11 at 1810. The large A-B-C pattern consists of the Major waves of Primary 4. The anomaly in this wave pattern is the 5-leg B wave which ended in the "failed fifth" wave on Dec 29, 2015. According to Elliott Wave theory, a corrective upwave is supposed to take a 3-wave form. But at the time it was happening, it was believed by many of us to be Major 5 of Primary 5. For the market to maintain that deception it had to deviate from the orthodox pattern, only appearing as a corrective B wave (to me) in retrospect.

The up days in the bottom forming action in the week of Jan. 18-22 featured a couple of days with the A-D line above +2000, one of which was a +2400+ day. This was a harbinger of further strength in the Fri, Jan.29 rally to come. The Friday, Feb 11 rally was not as strong as the Friday, Jan. 29 surge which at the time I thought was the beginning of Primary 5, but if there is follow through, it will prove more sustainable. Then Feb 11, 2016 would mark the low of Primary 4.

It is true that the DJIA closed 6 points below it's August lows while the DJ Transports have long since fallen below their Aug lows. So there is plenty of justification for calling today's action a Dow Theory sell signal. However, recently the Transports have strengthened and today they closed 200 points above their Jan 20 lows. Picking the appropriate points to compare is a kind of art whether it is the Dow Theory or any other set of indicators that are used in conjunction. I think I am on firm ground in saying that there was a short-term DT non-confirmation to the downside by the DJ Transports. The downside penetration by the Industrials was very marginal as well. However, strict Dow Theory rules state that any closing price above or below a previous level, no matter how small, counts as a penetration. In my opinion, the Dow Theory Transport (Rails) and Industrial confirmations or non-confirmations are the original ancestor of all the myriad index and indicator divergences and confirmations that are used today.
The Dow Theory is based on closing prices, The DJIA fell below it’s Oct, 2014 lows in Aug, 2015. The DJTA did not fall below it’s Oct 2014 lows on a closing basis in Aug, 2015. That is the reason why there was no Dow Theory bear market signal, not because of the flash crash. Subsequent to the Aug 2015 decline, the DJIA rose to new highs. The DJTA failed by a wide margin to do so. On Dec 18, 2015 the DJTA fell below it’s Aug, 2015 low but the DJIA did not do so by a wide margin.
There were declines prior to Aug, 2015 that some Dow Theory practitioners may have used as reference points and thus generated a bear market signal. But I consider the Oct, 2014 lows to be the correct ones to look at for comparison. From what I have read, I would say that most Dow Theorists interpret the price action from Oct 14, 2014 to mean that the Dow Theory has signaled a bear market. But obviously I have an interpretation contrary to that.

The NYSE daily A-D line fell below it's previous low but the NYSE McClellan Oscillator held well above it's previous low of -89 by rising to 58.6 and then halting it's last decline at about -43.5, thereby creating an uptrend. If the NYSE McClellan Oscillator can climb above 60 and then hold above 0 on any pullbacks, that would amplify the nascent uptrend in the NYSE Summation Index, which fought it's way up to -575 from a low of -800, and now appears to be making a higher low at -668.


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

http://stockcharts.com/h-sc/ui?s=$NYMO

http://stockcharts.com/h-sc/ui?s=%24NYSI

The severe decline in the NASDAQ and in secondary stocks served to revalue growth stocks and generate some sector rotation, possibly in preparation for finding new leadership in the next, and perhaps last phase of this bull market. The NASDAQ daily A-D line fell even further below it's previous low than the NYSE A-D line. Subsequently the NASDAQ McClellan Oscillator rose from a low of -86 to +58.6, and then fell to a higher low at -33, and has currently risen to the 0 level.The NASDAQ Summation index looks to be making a double bottom in the 4292-4313 area. Of course, to kick the NASDAQ Summation Index into an uptrend, the NASDAQ McClellan Oscillator needs to move above 50 and then stay above 0 on any declines.

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

If both of these Summation indexes can generate durable uptrends, that would be strong evidence that the bull market has resumed rather than just a counter-trend rally developing in a bear market .

From a psychological point of view, I would say that the market has been trying to convince it's players that any forthcoming rally is only corrective in nature, not a resumption of the primary bull. Most of the so-called bullish forecasts I read are only anticipating a counter-trend rally to the upside within a primary bear market. The bull needed to throw off some of the people who were riding it, especially on credit, with too much of a sense of equanimity. Although there some who agree with my position that Primary Wave 4 ended on Feb 11 at 1810 (intraday) or will end soon in this same price area, I think there is a great deal of fear that this is a bear market and it will resume it's destructive path downward after the upward reaction burns itself out. I feel quite a bit of fear myself and am not overconfident about this position that I've taken.

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.