So Far So Good...

The McClellan Oscillators have now gone negative again. So far so good for the move down into October!...

BHP

Balanced move currently in play for BHP.

Review

Last week's call for a move up has played out nicely with kudos to the Nasdaq, oversold oscillators, Sat-Nept square and Mercury cycle for providing the clues.

It's now a week later though and things have changed, as is often the case.


CYCLES

The Saturn-Node square on October 8th is still the major forthcoming negative to my mind. I know these aspects don't always work in the way that I would like but I'll be quite surprised if this one doesn't have a major effect.

For what it's worth there also seems to be quite a few analysts calling for this current point in time to be a major high or turn:

• Cha on Hotcopper has been expecting for months to see a major turn on September 22nd.
• Raj has posted publicly that he expects September 23rd (+/- 1 day) to be a major high and a sharp decline to follow.
• Grinberg is expecting a "crash" soon but is publicly silent (as usual) in regards to the actual date.
• Ted Phillips is expecting a turn down from September 22nd to 27th. 
• Gann advises to watch the equinoxes and solstices for turns.

My cycle pivots posted back in August were: 

• Late Aug/Early Sept (potentially the Sept 12th Low)
• Mid Sept (potentially the 22nd/23rd high)
• Early to Mid Oct Low

If the above is true then markets are now heading down into an October low.

ASX

The XJO has now retraced more than 50% of the preceding decline and the SPI chart has retraced approximately 62% to 66%, depending on whether you're looking at the Spot or the December contract. My take away from this is that if the market is making a retracement then it has already gone far enough to qualify as such.

 My comments from the breadth charts are:

• New highs have been steadily increasing... positive
• New lows have been steadily decreasing... positive
• The VIX has dropped... neutral
• The Summation Index has turned up... positive

So the breadth has the odds in favour of upside but there are a couple of bearish interpretations as well:

• The amount of progress made by the breadth indicators has been relatively weak when compared to the price gain.
• Indicators at the low were oversold but that's all. To have more confidence in the rally I would prefer to have seen breadth divergence but that wasn't the case. So the oversold decline has bounced... Now what?

NYSE 

As mentioned above one of the major clues for the rise last week was the relative strength of the Nasdaq. This week it is gone (on a short term basis), but it hasn't reversed.

The Russell 2000 has continued its' relative strength. This is notable but the Russell is also sitting at a double top with potential momentum divergence so I don't want to be using it for a long bet at the moment.

Similar to the ASX, the NYMO and NYSI have turned positive however the relative strength of the move, especially for the Summation Index, is weak.

The cumulative NYAD still says higher but the level of new highs in the current move is a bit low.

Bullish Percent is also relatively weak.

SENTIMENT

The CNN sentiment index is close to neutral. This doesn't say much but I'm also noting that it was close to neutral at last year's May high.

NAAIM sentiment has risen again and is at 79... Just under the 80 benchmark for 'high' readings. Note that NAAIM collect their data on Wednesdays and the market continued to rise for the remainder of the week so the actual number is possibly a bit higher now.

Other points to note are:

• AAII sentiment has bearishness rising and bullishness falling, but is still basically neutral.
• RYDEX asset allocations are little changed and are contrarian bearish.
• The Equity Put/Call ratio is not extreme but is relatively low. Similarly the VIX has made a rapid drop back to 12 and seems to have more upside than downside potential.
• The FAGIX:VUSTX ratio tells a similar story to the Nasdaq and has quickly shifted from bullish to neutral or even slightly bearish.

SUMMARY

Given the above I'm inclined to think that a top is imminent for both the ASX and NYSE.

Cycles look negative, breadth summation is weak and sentiment is high. That's good enough for me to expect a move down from here.

As always the inmates are in charge of the asylum so anything is possible, including a new high. With the current setup the way it is though I just can't imagine it.

Good luck to all.

Mad Bull Disease

Fairly self explanatory...

http://www.mercenarytrader.com/2014/09/this-corporate-profits-to-gdp-chart-proves-that-warren-buffett-is-a-massive-hypocrite/

Bourse Review

ASX 

The relative strength of the XSO has proven itself with an upmove in the XJO presumably underway.

Breadth indicators for the ASX are still negative but did reach oversold levels so they're not carrying any particularly strong message.

NYSE

The Russell 2000 is slightly bearish but has been trading pretty much in lock step with the SP 500.

The Nasdaq on the other hand continues to show obvious relative strength.

The McClellan Oscillator and Summation Index are both negative but their time for providing a leading indication has possibly been done for the time being.

One thing that is notable is the NYMOs extended period below zero, shown below with similar occurrences.

The cumulative NYAD does not have anything new to say so it is still bullish however the ema20 is now printing levels that are below zero so breadth has moved into negative territory on a net basis. 

On the bullish or neutral side it needs to be noted that the ema20 is at a level that has marked previous lows and that the market has been basically flat for two months so negative prints should be expected.

NYSE New highs have come back to a level that previously marked lows and New Lows have barely budged in the past couple of weeks...

When viewed together it does tend to look bullish!

On the chart below:

• Blue annotations are bullish;
• Red is bearish; and
• Purple means take note of the relative levels and the outcomes.

Given the above the current setup has both bullish and bearish indications and is perhaps a setup for a spike higher and collapse (but I've been wrong with that sort of speculation enough times before!).

Nasdaq new highs and lows are similar but without the recent negative divergence.

For the NYSE the Bullish Percent Index is peeling off and failing to recover when the market posts an up day. For the Nasdaq it is still looking ok though.

So the upshot of the above is...

There are leading indications for both bullish and bearish outcomes from the current point. 

The Nasdaq, which leads, is looking particularly strong and the faster oscillators have moved down to levels that have previously marked bottoms. 

There are some longer term and short term divergences in play however the recent drops have hardly dented the New Low readings so there isn't much of a case for breadth being hollowed out.

As always it might go up and it might go down but at the moment it is looking to me like a short term low is in place. 

Sentiment

• The CNN and NAAIM sentiment indicators have dropped markedly.
• The AAII sentiment survey has a higher bearish print but is still neutral.
• The Equity Put/Call ratio could go either way so a top may be in, or not.
• Rydex asset ratios are overall bearish and turning, so again a top may be in, or not.
• The VIX is mid-range.
• Fagix:Vustx has made a particularly bullish move!

Given the above my comments from a week or so ago still stand... The overall message from sentiment is that the market has been excessively bullish and that a substantial pullback is warranted, either with or without a spike higher. The pullback in the NAAIM and CNN however is making the current setup a bit indeterminate.

In the meantime I'm inclined to defer to the breadth indications and assume that the markets are more likely to move up than down. This is counter to the broader sentiment though so it's not particularly convincing.

WOW longer term

Monthly chart for WOW shows the recent bottoming action marked a 50% retracement rather accurately. The move up from the low has also printed some very high volume numbers (shown on the weekly chart), indicative of a breakout.

The daily chart is also notable for the following:

1. Price action around the lows shows fast up-moves followed by slow down-moves.
2. Current decline bottomed at approximately 62% retracement and 13 trading days down.

The chart below shows a similar setup in the DOW/SP500 at the 2002 lows.

The recent losses incurred by WOW have brought sentiment down, as was also proven by the fact that when the losses were announced 'publicly' the share price jumped by about 5%!

So the setup for WOW is about as bullish as I can think of with the exception of perhaps one more drive down for a monthly divergent low.

CBA longer term

CBA weekly and monthly charts are shown below however note that the monthly data is not up to date for some reason.

As previously posted CBA has tested horizontal support too many times and is at risk of falling through, however the longer term picture has some very bullish indications as follows:

1. Significant relative strength when compared to the XJO.
2. Current decline has matched both the 2007-2009 and 2010-2011 declines in terms of time.
3. Current decline is being supported in the 33-38% retracement range, consistent with a continuing bull market.
4. Previous decline into 2011 low retraced slightly less than 50% of the range, indicative of a strong trend. 
5. Wide spacing between the 2010 high and current lows, again indicative of a strong trend.

Cycles

Starting firstly with the long term cycles...

First up is a chart posted by Dave1968 on Hotcopper. One of the things that impresses me with this chart is that it ties in very nicely with the expected astrological effects out to 2020 and beyond. The upcoming low point in December this year also fits the current state of excessively bullish sentiment.

Next is the sunspot cycle. Back testing of this cycle is only limited by historical price data but even with the relatively short period of the following chart it is easy to see:

• Low around 1997 - Dow took off at start of 1995
• High in 2000 - Tech bubble, Dow peak etc.
• Low in 2009 - GFC
• High around 2013 to 2014 - Has recently passed so take note.
• Next low due around 2020 or 2021

The lunar node cycle bottomed in 2008 and reaches its high in mid 2018, hence the notable correlation with Dave1968's chart above! A picture can paint a thousand words though so I've copied my extension of Gann's financial timetable (which is based on the lunar node) below. It's worth noting that the panic in 2019 and low in 2020 will be concurrent with (and hence reinforce) the sunspot cycle.

Next is some upcoming planetary aspects. The short list below shows the major aspects hitting between now and the end of the year. 

The first aspect on the list is Saturn square Neptune on the 10th of September. According to James Mars Langham this pair is not a major market driver but given the moves over the last couple of weeks I'm inclined to see it as a direct hit on this occasion. Not included on the above list is the Mercury inferior conjunction which is also well correlated with lows and was exact earlier this week on the 12th... So there were two good reasons for the market to drop this week but the question now of course is whether they mark a low or does the market just continue down.

The next upcoming major aspect will be Saturn square the lunar node on October the 8th (on a SaturnDay no less!). This is very very negative so I'm inclined to at least start with the expectation that this may mark the low for the year. 

The aspects which follow the Saturn-node square are mostly positive and become very positive with the Saturn-Uranus trine on the 24th of December. Jupiter will be making an opposition to Uranus at almost exactly the same time however I've heard that Saturn generally dominates such situations so that is where my bias will lie, especially given that Saturn and Jupiter will be very near to an exact sextile (+ve) at the same time. 

I haven't listed the aspects for 2017 but will do so by the end of this year. I can say that I've done a quick review of the major planets and that they were almost universally positive throughout the year. This will of course reinforce the overall positive trend of the lunar node cycle so at the moment I'm expecting a big up year next year.

XJO-XSO

After a short period of relative weakness (a couple of weeks ago) the XSO has returned to its' more dominant pattern of strength relative to the XJO.

It's only a couple of days worth at the moment but if sentiment was more bearish it would certainly be more notable. Sometimes you only get a day or two's divergence from the XSO at a major turn (if any).

[Note to JC... There is a major cycle low on October the 8th. I know that timeframe is of interest to you! I'll post more on the weekend.]

SP500

After one more trading day the US market has printed the 38 to 62% retracement that I was looking for:

However... (there is nearly always a however!)...

The market drop on Friday night could well have marked a short term sentiment low.

Here's an alternative (bullish) interpretation of the SP500 chart:

Just to reiterate... A new high from here would most likely print a breadth divergence, however a drop back down to the 2120 level could also potentially print a divergence in favour of more upside. 

It's a bit of a dilemma so the end of week sentiment data will hopefully assist!

The potential cycle highs this month are enough to keep me out of the market at the moment but if given enough time another high confidence entry point is sure to appear. : )

'tis here

The big drop on Friday night and today has certainly drawn a lot of comment! I'll try not to add too much to it other than a review of the basics here (even if they're obvious).

Firstly the ASX:

The XSO is continuing to show some relative strength when compared to the XJO but there is as yet no divergence on the chart. In any case the longer term view is that the XSO has been significantly more bullish so it's not as though I'm looking for signs of the end of a bear market.

Todays drop on the bourse has brought the 38% retracement into play but I'm not buying it. Sentiment has been too high for too long so I will wait to see a whole lot more sideways to down price action before I get any confidence in a potential low.

The bearish indications on the CBA and MQG charts (refer to previous post) are playing ball with both stocks down and CBA having dropped below previous support.

Breadth indicators for the ASX have been bearish for some time. There were some positive divergences heading into the weekend but they may well be gone now. Either way I can't see that the bearish bias of the market setup over the last month or more can be interpreted as having run it's course.

NYSE:

The RUT is down hard but it was also rallying a whole lot more than the SPX as well.

The NYMO and NYSI are negative again, as would be expected.

I suggested two possible scenarios last week and the market did neither! Option A was an immediate drop (which I didn't expect to see) and option B was a spike higher before collapse. Instead the market made a small rally to print a lower top before the collapse. C'est la vie!!

The breadth indicators are pretty much useless at the moment. Nothing is overbought or oversold and nothing is diverging, up or down. The trend is down and the longer term NYMO and NYSI did call it but where to from here?

Here's a couple of things...

• There are some good odds that an intermediate term top is in.
• There isn't anything as yet to say that the decline has bottomed. 

BUT...!

• New lows on the NYSE hardly budged (chart below) and the cumulative NYAD has to be viewed as bullish.

SO... Shorts are the go but current prices are not my idea of a good entry. Instead I'm inclined to either look for a lower top (viz. 38 to 62% retracement) or wait for a much lower low to go long.

CBA and MQG

CBA looks to be running out of friends at the support level shown, which is only a small move below Friday's closing price.

The drop tonight might even see it get there on Monday.

MQG has moved down 15 weeks and up 30 with a failure to find a higher high. This setup doesn't always work but the probabilities are on the bearish side.

For what it's worth ANZ, NAB and WBC are a bit indeterminate to my eye at the moment although ANZ does have a tidy RSI divergence at the high.

September Clues

September is quoted as being the most bearish month but the present setup looks surprisingly bullish.

For the ASX:

The XSO has shown signs of relative strength over the last couple of trading days and is now 12 trading days down from the high so there are some better than usual odds that a low is in place.

The McClellan Oscillator and Summation Index are both negative but perhaps mildly oversold so a rally from here should not come as a shock. Other breadth indicators for the ASX are basically ok given the current state of the price structure.

Many thanks to Rolf for producing his breadth data at  http://www.notesonasx.com/ .


For the NYSE:

The Russell 2000 and COMPQ indices are both quite bullish relative to the SP500, and have been this way for a good while.

The NYMO and NYSI are both relatively unchanged from last week. There is a longer term divergence on the board but with this much time spent going sideways they need a good discount.

The NYMO is on the verge of going positive at the moment so the market may well print the 'option B' spike higher that I referred to last week. If so then this would almost certainly leave a lower high on the Summation Index which is something that has proven very reliable for turns in the last two years of sideways market trading.

The cumulative NYAD is still printing higher highs and therefore supports higher highs.

The ema20 of the NYAD shows the same divergences as the NYMO but with one key difference... The NYMO has been below zero for several weeks due to the fact that is is a comparison between two moving averages and the faster average has obviously been lower than the slower average. The ema20 on the other hand has been consistently printing above zero... Long story short this is not a market with a major slide in breadth going on.

All of the other breadth indicators that I watch for the NYSE are basically ok, as you would expect given the above.

The same indicators for the NASDAQ (which leads) are also ok and if anything are slightly more bullish.

Bulkowski's CPI indicator changed teams last week and is now painted green, again.

Sentiment:

CNN index is little changed from one week ago but there is still no price drop that was suggested by the excessively bullish readings a couple of weeks ago.

NAAIM sentiment dropped a little but is still way high at 88.

AAII sentiment is essentially unchanged, and neutral.

Rydex market allocations are also little changed but again with a significant dearth of bearish investment.

Equity Put/Call ratio says that this is not a low... The high may already be in, or not.

VIX is at the low end of the range... so of course implies 'do not buy here'.


So what does it all mean...

I think that the odds of a decline from this immediate point have dissipated significantly.

A rally from here would print a divergence signal on the Summation Index which to my mind would be a very big deal.

Sentiment also supports a bearish view so I think that a new high on the SPX should be sold, however I would want to see some shorter term indications at that point.

I may yet get to see that counter-intuitive mid September pivot high!