First to the prices:
It was a wild ride this week with the Dow ending up down only .24% for the week but the more broader indices continue to show weakness and they were down a comparison 2.55% on the Rut and 1.77% for the Value Line.
Again that –2.55% is not enough to knock us our of our RRY Rut trade triggered off the 4% buy signal so we continue to hold and hold with a long-term bullish mindset.
If you are in our trading room at TTTHedge.com or get my mid-week milepost and updates you have heard me say that the Russell 2000 needs to show some leadership here before we can go the next thrust up.
Here is this past weeks price action on both indices. Note how the Russell 2000 was making lower highs and lows while the SPX was gaining.
The RUT weakness is demonstrated in the the price action here as shown with a series of lower highs and lows while earlier in the week the SPX was making new highs and higher lows. On Thursday I thought that maybe the pullback would not be as strong (4-5%) as previous pullbacks on the SPX and that instead of getting to the targeted 1046/1068 SPX area we might only pullback to the 1068/1079 area. On Friday’s close I started adding to my long position based on hitting the 1079 area. We will see this week if we have topped or if this is a pullback to aim at a higher top.
Percentage of Stock above 40 DMA:
These are how these charts were left on Friday:
The top chart is the number of NYSE stocks above their respective 40 day moving average and the lower chart is the same for the Russell 2000. The horizontal red line on the Russell 2000 represents a historic bullish pivot point for this indicator to turn around on. For the bulls amongst us, we would like to see that magenta line turn up and cross above the 70% line sometime this week.
10 Day High – Low:
In order to allow me to compare 10 day highs – lows between indices, I changed the charts to be percentage based this week. These are the current values for the SPX and the Russell 2000:
We are still on a sell signal with both of this charts but we do have one day in the books of a trend reversal. Check out the relative weakness between the Rut and the SPX. The Rut closed Friday with 19.4% more stocks making new 10 day lows than 10 day highs compared to the SPX which is at 6% more lows than highs.
In order to turn this indicator up and confirm a “buy” Monday’s close needs to beat the 40% bar on the SPX and 16% bar on the RUT as pointed out by the double headed arrow. That would be a major rally. The danger for this indicator is that we closed fairly close to the lows for the week on both indices, any break lower will spike both of these down and ruin the one day trend we established on Friday. So if you are in the room on Monday or monitoring Twitter we will update the 10 day High-Low signal. A higher close on Monday should bring us closer to a buy signal as Tuesday’s bar on this signal is quite week at –8% ish for Rut +18% is for the SPX. Meaning if we do not move too far down on Monday we could see a reversal setup as soon as Tuesday.
52 Week Highs:
The 52 week new high indicators have been in this “every-other-day” oscillation for about 3 weeks now since the beginning of October. I find this very worrisome as it might be long-term topping indicator. It also does havoc to our simple 5 day moving average. Notice that both the NYSE and the RUT have a two day bullish pattern but we have had that over and over again. The bulls have their opportunity on Monday to reverse the process by building a higher bar than Friday’s bar of 182 on the NYSE and 66 on the RUT. Pay attention to the New High data published every 30 minutes on http://twitter.com/Redsdata. That D1 number needs to stay + all day. In order to turn the indicators into a confirmed buy signal the day-5 bars are very high and it would take a huge rally. A simple higher bar would flash bullish and last Tuesday’s bars on both indices are relatively low enough that Tuesday could be a reversal day and send this indicator into the buy direction.
Anything lower on Monday will keep us on our sell signal.
Zweig:
Since the beginning of the Thrust, or two days into it I have been worried about the lack of follow through. Most of the successful thrusts that have taken us to new highs have broken that overbought area of 60 (signified by a green top). This thrust did not make it there and we are correcting.
The Russell Zweig tends to get into oversold before turning back up and we are not there yet. We sit in neutral territory here with the momentum in the Bears camp.
Monday, for the bulls to turn this thing around they need to get to that positive A/D area and preferably above the 2:1 so if you are in the room watch the A/D race lines for a close above 2:1 for the bulls, lower for the bears.
Conclusion:
While we are in a sell period I have not seen anything yet that tells me this bull run is over. I still expect to see another dash for the top and some type of exhausting run of new highs. We have not broken any of the templates setup during the other thrusts. If we do rally from these levels I think we can go quite a ways and possibly be putting in a long term top. A rally from these levels while short-term bullish would make me become more longer term bearish.
Falling another 2 or 3% from here down to that 1046 area on the SPX would still be quite normal and a run form there with a decent thrust would indicate we go much higher and maintain a long-term bullish outlook. A breakdown below 1035 would be a major pullback indicating a resetting of the markets.
Monday and Tuesday will be key days for setting the pattern over the next 10 days or so. I have given you all some things to look at over the next couple of days to help you setup for the next leg both up and down.
We have a lot earnings reports that bulls and bears will be spinning this week. Econ data starts on Tuesday with Schiller home price index and consumer confidence. Wednesday we get Mortgage apps and Durable Goods before the bell and at 10:00 am we get New Home Sales followed by the weekly Crude Oil inventories at 10:30. Thursday we get our first print of GDP that has a high forecast of 3.10%. That is quite a high bar to set. So the week should be quite volatile so hold on, watch the data, watch how the market reacts to these news events.
Stay tuned..
See you in the Markets
Marlin aka: RedlionTrader
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