TECHNICAL OUTLOOK: IN A CONFIRMED BULL MARKET
By Decision Point:
While most people follow the NYSE Advance-Decline Line, which is composed of the approximately 3500 issues traded on the NYSE DecisionPoint.com has 19 versions of the Advance-Decline (A-D) Line in order to more accurately portray the internal picture of specific market and sector indexes.
For example, the NYSE Composite Index is composed of only the 1839 common stocks traded on the NYSE, so we have constructed breadth and volume A-D Lines (displayed on the chart below) using only those 1839 common stocks. The first thing of note is the negative divergence that accompanied the bull market top in 2007. The most important feature of the moment is that the trend of both the breadth and volume lines confirms the strong rise in prices from the March 2009 lows.
Some will wonder if it is significant that the A-D Volume Line has exceeded its 2009 high. In my opinion it is not. Of importance is that the A-D Lines confirm the current medium-term price trend. Divergences spanning several years, in my observation, should be ignored.
The next chart is of the S&P 500 A-D Lines, which of course are composed of only the stocks in the S&P 500 Index. Note that we have the same negative divergence in 2008, and the same confirmation of the current bull market trend.
The next A-D Line chart is for the Rydex equal-weighted version of the S&P Utilities SPDR. The indicators are constructed from the 31 stocks currently assigned to the utilities sector. While the price index is challenging pervious highs, note that both the breadth and volume A-D Lines are diverging negatively, indicating that the bull market in the utilities sector may be over. My opinion is that this sector should be avoided until breadth and volume begin trending upward again.
Unlike many indicators and oscillators, the Advance-Decline Lines have a theoretically infinite range and are not subject to becoming overbought or oversold. Overall, they are confirming the current bull market. Look at the A-D Lines of specific sectors (we track the nine SPDR sectors) in order to find specific areas of weakness and strength.
The Advance-Decline Line??
Dubious at best–Why?
Is a one or two cent move in a stock an Advance?
If you could filter out all moves plus or minus of a quarter point–you might have a resonable indicator.
I posted last week a simple explanation of the Intermediate Term momentum Indicator used by Decision Point–I use a similar metric.
Updated: This Indicator remains at the top of its range.
Can the Market continue to grind Higher –Yes.
At this point in Time and At this point in the “Bull Market”
Probabilities favor a sideway’s to down price action–May thru August.
I believe you will be able to buy Stocks Cheaper in the Sept/October time frame.
I do not know what “Event” will put a Intermediate term top on this market.
I do know that the “current” Financial Reform bill has done more to keep this “Bull” breathing than the latest earnings reports.
Nothing like a Little Regulation! and I do mean Little!
It should ALSO be noted that this comes from decision point. If you look at their recent posts: http://www.decisionpoint.com/ChartSpotliteFiles/ChartSpotMenu.html
leading back to the beginning of the year, EVERY SINGLE PREDICTION WAS WRONG!!! How’s that for consistency in TA?
May favorite prediction is that the dollar is going to correct in March 2010 sending gold to potential 1400:
http://www.decisionpoint.com/ChartSpotliteFiles/100226_cspot.html
Opps, they sure got that one wrong! Not only did another leg get produced but the Dollar is still trending up with “higher lows” being produced on the way.
http://stockcharts.com/h-sc/ui?s=$USD&p=D&yr=1&mn=0&dy=0&id=p36095806980
ZZZZZ. Technical Analysis WITHOUT fundamental anaylsis shifts is COMPLETELY WORTHLESS!!!
J Dukate
Consider the “Theory” that Interest Rates can be controlled by buying and selling “Gold”.
None other that Alan Greenspan postulated this idea many many years ago–when blood still circulated up to his brain!
Our current and in residence “Economic Guru”–Larry Summers proved this very idea in an academic research paper several yrs ago.
Search the web for the Gold/Interest Rate connection–consider the facts of the mechanism and then consider the “Short” positons in the Gold and Silver markets.
PS: I personally like this view of the dollar. Coinciding with a major unforseen pullback in the market & gold : http://www.theleadernews.com/images/Dollar.jpg
But who knows. What would support this move?
http://inflationdata.com/ftf/images/charts/MIP/Moore_Inflation_Predictor.htm
http://av.r.ftdata.co.uk/files/2010/03/M1-Money-multiplier.jpg
I guess we’ll all just have to wait and see. AWF is probably the smartest just chillin’ on the sidelines.
AWF went “All In” the early march–but the recent news from The SEC and the Markets reaction stopped me out of several positions.
The door is only so wide when you are trying to get out.
Check this out.
http://www.goldensextant.com/commentary18.html#anchor196905
Don’t forget all the economic policies of this administration centered in weak dollar. How can you double exports in 5 years? How can you get jobs back from outsourcing? How can you pay back massive debt? It is possible that other countries are more blantant in cheating, but there is no reason to believe Fed to be honest in interest rates. Fundamental and technical are lining up for gold right now.
Check this out:
Read thru these articles—make sure you scroll down to bottom of each page.
http://www.nolanchart.com/article5640.html
http://www.cftc.gov/MarketReports/BankParticipationReports/index.htm
http://www.nolanchart.com/article6542.html
http://www.nolanchart.com/article6588.html
Check this out
http://www.nolanchart.com/article6588.html
“Fundamental and technical are lining up for gold right now.” – Ahh not so fast. Especially NOT the fundamentals. Read AWF’s link again:
http://www.goldensextant.com/commentary18.html#anchor196905
The economic mechanism is clear. Increases in REAL interest rates raise the carrying cost of nonmonetary gold(ie:jewelry), REDUCING the DEMAND for it. They also REDUCE the DEMAND for monetary gold as long as money demand is interest elastic. The resulting REDUCTION in the real price of gold is equivalent to an increase in the general price level.
So the key to gold is about REAL interest rates. And despite the Fed’s efforts to keep interest rates low… REAL interest rates will only go up over the next 5-10 years bringing the demand for GOLD DOWN!!
Why would REAL interest rates being heading UP? Simple: DEBT!!
http://market-ticker.denninger.net/uploads/ConsumerDebtAll.png
http://globalpatriot.com/wp-content/uploads/2009/06/national-debt-graph-300×298.gif
You see it goes like this. If the demand for gold’s future is DOWN then the crowd will be told and will believe the complete opposite. That is why decisio point got it wrong. They are applying technical analysis with a bias to the belief that gold is going up. And the ads on TV tell you the same. Crowd becomes educated in the opposite direction to where big money will move.
The contrarians finds all this pretty dang funny.
Real interest going up because debt issuing? It is not what is happening. You might be right theoretically but better be sure nobody is rigging the market with debt monetization.
We all know QE, but what people had missed is Fed lent banks short end and have banks carry trade long end, that is indirect monetization. I don’t know if this is still the case in 10 years, I don’t care either because my trading/investing time frame is no more than 24 months. And in my time frame, I see little chance nominal rates going up and/or inflation goes down.
Read the theory on REAL interest rates AGAIN and their effects on Gold. Now imagine a spike up in the treasure yeild which determines REAL interest rates. Heck why imagine. If you say technicals are good for gold. Then you obviously don’t see the head and shoulder formation for the Treasury yeild. But you will if your hold time for Gold is now and for the next year.
Make sure you have a hard hat on.
LZ,
Let me SHOW YOU the FUTURE of REAL RATES.
Enjoy.
http://www.theleadernews.com/images/RealRates.jpg
LZ:
While the 30yr gives a guide to future interest rates you must consider the Inflation rate or alternate measures of the inflation when considering the “Real” Interest Rate.
Please read thru this article–see the charts
http://www.nolanchart.com/article6542.html
BTW: I don’t disagree with the direction of the trend in the chart you posted.
another set of charts tells me this is the biggest SPECULATIVE market since 1932-33