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The Markets in Development Briefing for September 11, 2014

Below is the link to today’s Briefing.  Based on the current analysis and information from the market, I believe the higher probability is for slight new highs.  That said, I also think the market is sending signals that a longer term top may be forming.  While that does not preclude slight new highs over the next few weeks, the structure of the market continues to weaken.  The current environment is such that anything can tip the market over.  However, without that tipping event, sellers are not strong enough to outweigh buyers.  Longer term, buyers appear to be weakening.  One day, unless the structure of the market changes, those buyers will become sellers also.  For now, the trend is up but the risk is to the downside and it increases with each new thrust higher.

The Markets in Development Briefing for September 11, 2011

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Does Participation Matter Part II

After sending out my analysis titled, “Does Participation Matter,” I had some excellent questions and comments.  One questioned the 1990s bull market and the fact that the Russell lagged.  Therefore, I went back to the 1990s and analyzed the participation by the Indices up until the correction that took place in 1998.  You will see, the Russell did not confirm the new highs in the other Indices and that led to a substantial rotation down.

You can access the analysis by clicking here: Does Participation Matter Part II.

Currently, the structure of the Market continues to deteriorate.  The last six trading days were a battle between buyers and sellers, with neither being able to take of control of the Market.  The trend in price is up, but the structure supporting price is declining.  Until that changes, use caution on long positions.

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The Markets in Development Briefing for September 4, 2014

An interesting battle has been going on in the Stock Indices for the last two days between buyers and sellers with neither on being able to take control of the markets.  Longer term, the market internals are not confirming the rally and the inter-market divergence with the Russell still gives me great concern.

Employment numbers are out tomorrow morning and they will likely give ammunition to either buyers or sellers to move the market in a large way.

You can access today’s Briefing by clicking the following link: The Markets in Development Briefing for September 4, 2014.

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The Markets in Development Briefing for August 28, 2014

Volume continues to decline going into the long holiday weekend.  Expect the markets to continue to push higher.  However, the risk is to the downside.  Any event that is geopolitical, or economic that hits the market environment, will likely result in a large move lower.  However, until then, the trend is up.  The market internals are not confirming it, so use caution.

You can access the Briefing here: The Markets in Development Briefing for August 28, 2014.

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Does Participation Matter

In a recent Marketwatch.com article the author described the lack of participation of all stocks in the current rally as normal.  Since 2013 about 17.08% of stocks have participated by moving to new highs.  The current rally over the last several days has only 9.8% of stock participating.  Am I missing something?

I looked back at the inter-market relationships between the S&P, NASDAQ and Russell to determine if there was reason for concern.  You can access both the Briefing for August 22, 2014 and my analysis titled: Does Participation Matter? by clicking the link below.

Does Participation Matter?

You will see that participation does matter in a healthy rally.

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The Markets in Development Briefing for August 21, 2014

The S&P and NASDAQ have pushed to new highs.  Price is the only rising statistic.  Volume continues to decline.  Breadth is diverging from price.  New highs are not confirming the Indices new highs and the Russell is diverging from the other Indices and could be signaling that it is still in a countertrend rotation up that when complete could usher in another move to the downside.

You can access today’s Briefing here:  The Markets in Development Briefing for August 21, 2014.

Trading psychology is to buy the dips and ignore the internals and statistics.  Until those low volume buyers get run over by impulsive selling, the trend is up, but the trend is weak and getting weaker.  While the internals can change and confirm price, the higher probability is for price to correct to the internals.  Most times, when the internals correct to price, it is at a news event.  There will be lots of Fed speakers over the next couple of days.

 

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The Markets in Development Briefing for August 18, 2014

Over the past two weeks, I have outlined one of two scenarios that are playing out in the Stock Indices.  Either the move down to test 1900 in the S&P is the beginning of a longer term trend change, or it is a countertrend rotation to correct the longer term rally.  The weight of evidence up to today suggested it was potentially the beginning of a trend change.

Keeping that in mind, the S&P has reached a point of time and price where the next leg down should begin.  If it does not, then the weight of evidence will shift to the move down being countertrend to the rally and the move up will take the S&P to new all-time highs.

What happens tomorrow will be extremely important to the decision process.  You can access today’s Briefing from the link below.

The Markets in Development Briefing for August 18, 2014

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Stock Indices Approach Critical Levels

As discussed in the previous Briefings, the Stock Indices have now completed objectives in terms of price, extremely low volume, breadth divergences, and almost time.

Today, the S&P reached the 1955 area.  They can allow for an additional 5 points or more to the upside, but it is not necessary.  Volume has continued to decline and was the lowest it has been since the rally off the low began.

Breadth diverged today, suggesting a continuation of weakness, as buyers seem to be waning.  The Market has reached a point of being extremely overbought with all three timeframes converging in overbought territory.  This typically suggests a large move is in the offing.  Finally, the Russell diverged from the S&P and NASDAQ today.  The latter were able to trade above Monday’s high, while the Russell did not.

Unless there is a news event that changes the market internals, the waning strength has all of the characteristics of a countertrend rally and there should be another thrust to the downside.  Tomorrow’s trading will be extremely important in its development, especially the Initial Balance Period.

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The Markets in Development Briefing for August 12, 2014

The Stock Indices are fulfilling the analysis over the past several days.  While there is a possibility the move down is countertrend to the rally and there will be new highs put in, the development over the last several days suggests the move down is impulsive and the rotation up is countertrend to the move down.  This suggests there is another leg down that is in the offing.

You can access the Briefing here: The Markets in Development Briefing.

The analysis will only change on a move higher that is accompanied by expanding volume.  There is a good chance the high of yesterday will be traded through before the rotation is complete.  While that is not required for the trend to exert itself once again, I discuss upside resistance areas that are extremely important.

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The Markets in Development Briefing for August 11, 2014

When the Stock Indices opened higher and continued to make their move up, I had to remind myself the analysis suggests the move is a greater degree timeframe countertrend rotation.  This means that it is greater in time than the rotations in the initial move down and greater in price.  Keeping this in mind and having patience to wait for the move to be complete can lead to good profits, when the main trend exerts itself once again.

You can access the Briefing here: The Markets in Development Briefing for August 11, 2014.

What would change the analysis would be a move higher on increasing volume.  However, the Indices reached a point of being extremely overbought today suggesting another rotation down.  While the main trend, if it is down, can exert itself at anytime, especially with current geopolitical and economic conditions, I think the higher probability is for a move down and then another leg up that will exceed today’s high.  If that all occurs on low volume, the next move lower could be significant.