Morse Code Wednesday, page-2

Tuesday Night Liqueurs.26 April, 2016.

XJO down today about -0.3%. That continued the gentle slide-down we saw last Friday. This pull-back is not looking dramatic at this stage.

Following is the STW Chart (ETF for XJO):



Negative divergences on DPO and MFI suggest we'll see more down-side. The relationship between the short term stochastic and the long term stochastic suggest that this pull-back will be bought.

The weakest sector today was Materials -2.1%. Next worst was Energy -1%. If you remember from my Weekly Report on Sunday, these were the best two performers last week. So we're seeing the usual reaction in these two against out-performance. The question now is: Will this pull-back result in a reversion to the long-term down-trend?

Here's the chart for Energy (XEJ):



Last Thursday's big up day took the index right up to the 200-Day MA. Friday and today have seen small drops from that important marker.

So - the current two-day pull-back is not unexpected.

Some indices were also overbought - so, again, some pull-back is not unexpected.

The relationship between the short term stochastic and the long term stochastic suggests that a pull-back will likely be bought. The long term stochastic is still rising so that suggests that the uptrend is intact. So any short-term pull-back is likely to be bought.

That's a positive for the broad market.

RB.