Sunday, June 10, 2012

NYMO Weekly Issues Buy Signal

Market internals have recently been showing signs of bottoming which would of course imply a bounce of some sort. However, until the improvement in those market internals showed a bit more 'conviction', their signal had not been convincing enough for my liking.  Nonetheless, once they became more developed it became apparent that it's entirely possible, considering that they're emerging from levels where bottoms often occur, that they are signaling more than just a small bounce.  At this early stage the size of the coming move higher is difficult to ascertain but it seems that something significant could be in the works.  From this point forward we'd defer to other methods of measurement to try to get a sense about the power and duration behind this 'bounce'.

But one thing I was waiting for in some of the market internals charts is a positive divergence because until we see one, my own personal conviction in the reliability of the market internals charts was relatively low.  But with the close on Friday we got confirmation of a positive divergence on a weekly chart of the McClellan Oscillator.  This is a very reliable signal and for the first time in quite a while I'm pretty comfortable with long positions initiated earlier in the week, particularly the smaller caps (RUT).  It's still hard to say whether or not it would be wise to start to add to them though, given the schizophrenia that keeps emerging out of Europe.  In any case, here is a weekly chart of NYMO with the NYSE shown in a panel above:

Click here for a full blown version



  1. Leaving the markets behind and pushing myself from the computer. Looks like a bounce coming, but I don't care. Off to Alberta tomorrow AM. The bike is packed and I will be in those Canadian Rockies soon.

    Thanks for the advice AR, also going to Yellowstone and glacier. Be well and prosper!

  2. I don't know AR. From an EW perspective still looks like a four to me, with one more drop lower to finish the five. Then comes a big wave 2 bounce.

    Notice how gold never bought into this little QE rumor rally. If it was the real thing, GLD would have taken off. Still might, I'd even say probably will, but maybe not quite yet.

    Oh well. It's all just guesses until something happens. As they say in sports, "And that, ladies and gentlemen, is why they still go ahead and play the game."

  3. That's what I think too Papa.  In fact that's how I'm playing it at the moment.  But I don't think the 4 is finished, that's all.  In my humble opinion the 'c' wave of 4 is in progress.  After that, the 5th wave lower to complete wave 1 down.  Then the big wave 2 bounce.  We're on the same wavelength but maybe one phase out of sync.

    The buy signals being issued by the market internals are, to borrow a word from a fellow blogger, "fragile".  In fact, if the market heads lower to finish wave 5 that would probably cause them to form pos. divergences and that would make them quite a bit more robust... just in time for the bigger bounce we're discussing.

  4. I've been thinking about your trip DL.  I hope your journey is beautiful and safe.  Don't forget to bring your rain gear, June can still be pretty wet but that just makes the fresh air that much fresher.  And bring your camera and a box of bear treats.  Stay safe... and come back and tell us all about it.  Maybe with some photos too?  Like about 100 of 'em?

    Stay safe, ok?

  5. euphoria from Spanish bailout announcement quickly fades; markets reverse 

    why would the rally fade?
    existing bondholders would be subordinated and asked to take losses.

  6. I'm still keeping an eye on those necklines as one of my main confirmation or failure "lines in the sand".

  7. Hi I have been a subscriber to the McCellan Daily Edition for a while, I also wanted to share my charts (Tom Said its Absolutely Fine). Check it out look at the trend line drawn and today we stopped right above it. Very Bullish.

  8. It's a scared market for sure.  Last week they put in a very impressive bullish engulfing candle that in the past has almost always been followed by a hell of a rally.  Then today they put in an even more impressive "bearish" engulfing candle.  In the process, the Russell put in a total swing of over 3% from peak in futures to today's cash low.  Schitzo to say the least.

  9. Compare to the charts from the early nineteen thirties.

     Plus, keep an eye on the Euro Zone. It's finally headed for a meltdown. The show down should begin in a week or so...Greece, Spain, Italy...i.e. the PIIGS.

  10. Hey AR, came up with an interesting chart this evening.  Thoughts?


  11. Well let me start off by saying that I absolutely want you scenario to pan out if for no other reason than it irks the hell out of me when the market issue a very, very reliable bullish buy signal and then procede to put in the wildest one day swing we've seen in mumfs.  I see you pointed that out in the E-minis.  The Russell did it as well, being up as much as 1.75% (or more) in the wee hours and then plummeting from there all the way into a loss of 2.2% in the cash.  A total swing of 4% on the day after the best weekly bullish engulfing candle since Feb. of 2010.  That puts my nose out of joint let me tell ya, because when the day comes that a weekly buy signal (which still exists by the way) is dishonored like that it tells me only one thing... bear market rules are in effect.  There will be no return to a bull market for perhaps 5 years at the minimum.  So where do we go from here?

    I've also been focusing on the potential for that inverted H&S.  Rather than upload a bunch of charts here... why don't we just swing over there and look at them.  It was the post entitled "Russell Is A Tattletale".  On that post (which is still 100% valid in my opinion) we can see that weekly bullish engulfing candle as well as the inverted H&S we're referring to.  It panned out pretty damned close to what I had envisioned, although I admit I had also entertained the thought that the second leg lower that happened today might not occur.  Well I was dead worng about that aspect of the call, but other than that it has formed to perfection.

    And now we are witness to a hell of a bullish weekl signal from the market internals... and the market tanks like this?  Cut me some slack here!  Today the daily Summation Indexes actually 'rose'.  Mind you they lag the market by a day or three but they were also lagging when they went bullish late last week.  Further, today the Bullish Percent on the OEX, SPX, NDX and COMPQ all went higher.  They didn't rise much, but they rose... meaning that at the end of trading today there were actually more<.u> stocks deemed as bullish than at the close on Friday.  Even in the financials the Bullish Percent today remained dead flat. 

    So I'd have to say that for the bears (and believe me, I'm in that camp) to get comfortable and cocky could be quite premature.  I honestly think your scenario is a better fit as well.  What we just finished watching unfold over the past 11 weeks was either a proper 5 wave impulse or else a leading diagonal (in the Russell I think it's a diagonal because of all the 3-wave sequences).  In any case... it's finished.  Now that wave needs to correct to the upside.  To believe that that correction is all of a sudden "finished" in 5 trading days seems to me to be a bit of a pipe dream.  When was the last time we witnessed an 11 week impulsive wave correct in 1 week?  Especially a bearish one, lol.  We've never even seen a bullish impulse correct that fast.  So again... if we've just seen an 11 week bearish impulse be fully 'corrected' in one week the man... the bearish rules are even more in effect than I thought possible.

    So yeah... I'll go along with your interpretation.  Because the odds that the bulls have suddenly and completely vacated the stock markets for good are just way too impossible.  Not to mention that from the EW perspective there are still some 'very bullish' counts that can be labeled even tonight. But I'd have to say that with this much momentum to the downside we're likely going to see another plunge that winds up producing a very bullish green daily candle.  Probably tomorrow or Wednesday would be my guess.

  12. I feel your pain.  I agonized over the SPX chart for hours, trying to decipher it.  It was way out of whack with RUT, NYA even COMP.  Finally called it a FADE at the opening bell (yay!) but could have saved myself lots of grief by just looking at this e-minis chart (I believe we bounce hard off the midline tomorrow, BTW.)  The channels have been working well the past couple of months -- especially on RSI, which shows a completed back test as of today (second chart.)  Hang in there, buddy.

  13. Howdy! What a amazingly looking site you run! Did you organize your blog on your own?