Comment: A lop-sided set of numbers. The weak breadth (R2K) is a concern. Rarely can a market withstand crumbling breadth without pulling back.
In Europe.
French CAC: -0.62% German DAX: -0.29% London FTSE: +0.05% Italy MIB: -0.97%
New York Stock Exchange NewHighs/NewLows. 98/22. Ratio: 81.7%. NL less than NH. In the “Do Not Sell” Zone (above 80%). Nasdaq NH/NL 85/49. Ratio: 63.4%. The weak breadth numbers in the R2K are being confirmed by the Nasdaq NH/NL. NYSE NH/NL are still good, but the New Highs have come well off the sizzling numbers seen about two weeks ago, then we had a couple of days where New Highs were above 400.
Technical Comment on the SP500 (closed at 1761.64)
Indicators:
MACD Histogram: Above zero. Positive, but dropping. Bears want this below zero. MACD: Above zero. Positive. RSI.9 is at 64.8. Positive. Bears want this below zero. Stochastic. 80.2. Overbought. Below its signal line. Negative. Bears want this below 80. CCI.14: +59.8. Bears want this below zero. Money Flow: 65.4. Falling. Bears want this below 50.
Momentum indicators are flashing warning signals. MFI hit above 80 and fallen below 80. Usually we need to see a negative divergence before a sell-off. But the September pull-back didn’t do that. The MFI hit 80 and then the SPX pulled back almost 5%. So it is not a necessary condition. Any time MFI gets above 80, its time to think defensively.
There’s plenty of support under the current levels, so it’s difficult to imagine a serious correction. But let’s see what happens when/if the index gets back near the supports of the rising bull channel.
Last night in NY, BHP up +0.38% and the Australian shares ETF (EWA) -0.07%. Gold was down -0.62%. Copper down -0.4%. Ozzie Dollar down -0.24%. There’s not much joy in that for Australia.
Here’s the chart for IWM (ETF for the R2K):
In this session, the IWM found support at the top of the Congestion Zone which developed in September/October. After falling heavily early in the session, the IWM found support and bounced back. The lower tail suggests buying support. This has now seen three down days in a row. 3/4 down days is often all we see in a short term pull-back before the market turns up. If this is to go lower, it has to break through that Congestion Zone. That could be difficult. Indicators are suggesting this will go lower, but a bit of turgid chop could see these indicators get down further without much movement in the Index. Indicators show momentum, nothing more. The odds still favour more downside, If we get turgid chop for a week or two, this could set up nicely for a Santa Rally.
(20min delay)