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US Stock Service
Daily Hotline
10 November 2014    By John Gray
Market Action
  • The DJ I and S&P 500 eked out record closes again on Friday but the encouraging monthly employment report had little impact on stocks. Jobs creation was slightly below forecasts but also above 200,000 for the 9th straight month. That is the best steak since 1995.
  • With the end of Fed stimulus, merely good economic news is apparently not enough. Many analysts express the belief stocks are now fairly valued so some new reason for buying is needed. That could come from strong holiday spending that would result in new hiring to handle the demand and restock the inventories that are sold.
  • NYSE averages also ended up for the third week in-a-row while the NASDAQ and Russell 2000 were flat. Most of their charts were steady, holding at or just above their 31-Oct closes. Indicators were also little changed over the week. They remain positive with only initial overbought readings shown. That allows for more gains although momentum also slows top levels nearing.
  • There was more stock breakout activity Friday suggesting accumulation is still underway. There was also an interesting weekly climax reading. It included notable sector concentration on both directions. Hints of trading tops were signaled amongst real estate shares while precious metal stock selling climaxes pointed to potential trading rallies.
Market Drivers
  • The unemployment rate fell to 5.8% in Oct even as a less than expected increase in jobs occurred. The jobless rate improved because more people entered the work force and more found jobs. That countered prior data showing lower workforce participation. However overall it remains low and there was little sign of pressure for higher wages.
  • While the domestic stimulus has ended US Fed Chair Yellen said central banks around the world still needed to deploy all available tools to boost world economies. That was echoed by IMF Chief Lagarde. Their comments were clearly aimed at Europe.
  • Gold and crude ended last week with gains and chart reversals up. Energy shares have been battered over recent weeks while precious metals have suffered large losses since the summer. Any trading rallies should help the overall market.
Technical Outlook
  • The first week of November ended with the primary index charts all at highs, either all-time for the S&P 500 and DJ I or 14 year records for the NASDAQ. That was also their position the prior Friday close and the week had limited new activity as the strong late Oct rally consolidated. The short term action is also partially overbought. Some sector rotation did occur and accumulation may be considered in areas shifting positive. While a modest near term pullback would not surprise up the general tone should be up for the rest of this year. That is signaled by the slowly improving bullish % charts.
  • Large Caps 80% invested, Mid Caps 80% and Small Caps 80%.
  • Bear Portfolio is 0% short.
Short Term Medium Term
II Short Term Composite Indicator
70.7% (+1.70%)
Bull Confirmed
NYSE %10 Week Moving Average
62.59% (+1.33)
Bull Confirmed
II Short Term Sector Sum
-7.50      (+2.00)
New P&F Signals: US Breakouts
Close 1-Day Change
Bulls 32 -6
Bears 9 -3
NYSE Bullish % Indicator
50.75% (+0.70%)
Bear Correction
NYSE %30 Week Moving Average
56.96% (+0.21)
Bull Confirmed
II Long Term Composite Indicator
+135.50     (+2.50)
  • The short term comp and % 10-wk MA charts were unchanged. Some initial overbought readings have been achieved.
  • The stock breakout remained strong, improving another industry group status and lifting the sector sum value again.
  • The NASDAQ high low ratio hit X 68%. It could enter overbought territory today and near its last top at X 72%.
Index Trends
  Close Volume 1-Day Change P&F Signals Support
Signal Trend Start Date Trend Reversal
DJ Industrials 17,573.9 70.7m +19.46 +0.1% Bull Up 30 Oct 2014 15,800.00 15340.7/15855.1
S&P 500 Index 2,031.92 498.1m +0.71 +0.0% Bull Up 28 Oct 2014 1,820.00 1820.66/2001.01
NASDAQ Comp. 4,632.53 491.0m -5.94 -0.1% Bull Up 20 Oct 2014 4,100.00 3946.03/4116.6
NASDAQ 100 4,160.51 160.8m -3.58 -0.1% Bull Up 28 Oct 2014 3,700.00 3489.6/3700.22
S&P Midcap 400 1,430.07 133.5m +0.56 +0.0% Bull Up 17 Oct 2014 1,405.00
Russell 2000 Index 1,173.32 281.6m +1.46 +0.1% Bull Up 16 Oct 2014 1,100.00
Closing prices through Friday November 7, 2014
Chart Activity - Broad Index Moves 

Despite the generally positive jobs report Friday stocks only traded up and down in fairly tight ranges. Small closing gains Friday did mean new records for the DJ I and S&P 500 while the NASDAQ ended fractionally lower. It was also flat for the entire week while the NYSE averages had modest gains. The advance decline data was also mixed and volume fell again. Large traders generally stepped back last week after the incredible two-week surge that ended October. Now that earnings season is ending and the Fed has stepped back some new follow through is needed or else stocks will roll over as the desire to do some profit taking builds.

The only index chart move Friday was a small advance above a prior top for the S&P Mid-Cap. It is bullish but still below its Sep and Jul highs. All index charts show bullish formations.

Chart Activity - Sector Indexes 

The sector activity was also subdued. The S&P 500 Energy and Financial charts moved up with a new high for the latter. The Biotech BTK and Drug DRG reversed down. The BTK ended near a sell while the DRG turned down from its resistance. The Semiconductor SOX chart reversed down Thursday and shifted to a trading sell on the final session last week.

Chart Activity - Commodities 

After two weeks of declines, gold reversed direction Friday. Prices rallied almost $50 intraday, from a low just above $1130 to near $11180 at the close. The chart reversed up 3-boxes to X $1170, from a 4˝ year low at O $1140. A move to $1200 in needed for a bullish low pole but there was a selling climax that suggested it may occur. More than 20 gold stocks also had selling climaxes. The gold indexes [XAU & HUI] moved to trading buy signals after their Thursday upturns. The Precious Metals bullish % had a bear confirmed status shift on 30-Sep and moved deeper into oversold territory Wednesday at O 4% but then had a small gain.

Crude oil ended last week around $78. The chart held its Wednesday upturn to X $79, from its Tuesday low at O $76. In Oct-11 it fell to $75. The chart needs $81 for a positive low pole formation status shift. The energy indexes [OSX & XOI] had more gains after their Wednesday reversals up. Each moved to a buy alert. They shifted short term bullish Thursday with new low pole formations.

Index Breadth

% 10 Week Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 62.59 +1.33 Bull Confirmed 23 Oct 2014
Nasdaq Composite 61.68 -0.32 Bull Confirmed 20 Oct 2014
S&P 500 81.12 -1.01 Bull Confirmed 23 Oct 2014
Nasdaq 100 82.69 -0.96 Bull Confirmed 23 Oct 2014
Option Stocks 72.13 +0.49 Bull Confirmed 23 Oct 2014
% 30 Week Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 56.96 +0.21 Bull Confirmed 21 Oct 2014
Nasdaq Composite 55.43 -0.89 Bull Alert 20 Oct 2014
S&P 500 78.11 -0.40 Bull Confirmed 24 Oct 2014
Nasdaq 100 80.77 n/c Bull Confirmed 28 Oct 2014
Option Stocks 64.43 -0.79 Bull Confirmed 21 Oct 2014
Bullish % Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 50.75 +0.70 Bear Correction 29 Oct 2014
Nasdaq Composite 50.59 +0.03 Bear Correction 29 Oct 2014
S&P 500 65.59 +0.20 Bear Correction 23 Oct 2014
Nasdaq 100 62.14 n/c Bear Correction 21 Oct 2014
Option Stocks 53.81 +0.50 Bear Correction 28 Oct 2014
Breadth Indicators oscillate between overbought highs, at 70% and above, and oversold lows, at 30% or lower.
The % 10-week moving average is short term, % 30-week moving average intermediate, and the bullish %s are longer term.


Indexes ended on either side of the flat line Friday with a small up bias for the NYSE while the NASDAQ ended lower. The caused only small daily differences for the moving average breadth values without a single move. Overall most readings remain below their 31-Oct highs with their charts holding those positions. Bullish status is universal. Three of the five short term % 10-wk MA charts are overbought with the S&P 500 two-boxes below its Jun-14 highs at X 86%. The NYSE and NASDAQ hold below 70% but both have penetrated their downtrend line resistance. Each was last overbought early Jul. All five charts buy signals from multiyear lows in Oct. That suggested strong rallies would follow.


All % 30-wk MA charts show rallies from mid-Oct levels that were the worst since late 2011. The S&P 500 and NASDAQ 100 are the first two to reach overbought levels. The NASDAQ Comp needs X 60% for a bull confirmed signal that would fulfill its current low pole prediction.


While indexes were overall flat Friday, the breakout data continued strong with 32 buys and 9 sells. The weekly total was 166 buys against 63 sells. Four of the broad area bullish %s values moved higher but none of the charts changed. The NYSE needs 54% to join the NASDAQ Comp and S&P 500 with a low pole formation retracement of its last vertical decline. That would predict more gains.

Current outlook:

Last week showed an overall pause in the moving average breadth indicator rallies. Bullish status is clear but some overbought readings have also been achieved. A slowdown for the momentum is typical as prior top levels are approached. They are still not at hand, especially for the two largest areas (NYSE and NASDAQ) suggest higher markets should still occur.  The broad area bullish %'s chart reversals up and new low poles also point to a larger overall moves, likely extending at least to the end of the year.



Close Change Chart Direction Chart Status Chart Action
Short term Composite Indicator 70.7 +1.70 Rising Bullish None
NYSE High-Low Index 79.78 +0.53 Rising Bullish None
Nasdaq High-Low Index 68.33 +1.43 Rising Bullish Higher
NYSE On Balance Volume (by DJIA) 284,473 +773.00 Rising Bullish Higher
NYSE On Balance Volume (by breadth) 541,664 +774.00 Rising Bullish Higher
Nasdaq on Balance Volume by Composite 502.5 -1.87 Falling Bullish None
Nasdaq on Balance Volume by Breadth 40.57 -1.86 Rising Bullish None
NYSE Cumulative Advance/Decline 409,827 +689.00 Rising Bullish None
NYSE Money Flow Index 49,305.5 (weekly) Rising Bullish None

  • Friday's slightly positive close caused limited further indicator chart gains with bullish status intact. The entire week showed stalling after initial overbought readings were achieved. There was some sector rotation so stock selection is very important. The long term outlook remains up.
  • The daily short term composite chart hit X 72% last Monday and held there all week. That is the best level since the early Jul overbought peak at X 76%. That was given as the initial goal when the chart turned up from its low. It has reached even higher levels historically but watch for a downturn to signal near term weakness.
  • There was another move up for the medium term daily NASDAQ high low ratio chart. It ended just below overbought territory and its last peak at X 72%, The NYSE is already overbought but it doesn't top out until it hits 90%.
  • The two daily NYSE on-balance-volume charts rallied. The DJ I hit a new high to confirm the index record. All four charts hold buy signals.
  • The weekly long-term composite chart was unchanged at X 130. It ended Oct with a new P&F buy that fulfilled the forecast of the prior low pole formation. It still not at top levels, either from this year and the loftier readings after the 2011 lows.

Industry Bullish %s and Sector Sum
Daily Industry Groups Bullish %s: Friday's breakout data remained strong with another 32 stock buy signals against 9 new sells. That produced a ratio very similar to the prior two sessions. The action amongst the 46 broad area industry groups bullish % charts was also steady with 8 charts up and none down for the second day. No moves were reversals but 1 P&F buy did cause a positive status shift and higher sector sum reading.

The sector sum holds short and long term bullish status. The Bell Curve shows a major recovery from the mid-Oct pattern that was skewed well to the left side of 50%. We noted that was the area attractive for longs. The sector sum indicator shifted short term bullish on 21-Oct, ending the negative status from 11-Jul. It now shows a long term P&F buy signal at -15.0 barely a week after achieving a bullish low pole at -27.0.

The sector sum value moved up to -7.5, up from -9.5. It is rallying from its Oct low at -40.0. That reading that was down to historic low levels.

The sector sum short term status is determined by its chart direction, along with the direction of the groups' cumulative advance decline line and the last three day's direction on the NYSE bullish %. The sector sum and cum A-D charts reversed up 21-Oct. The NYSE bullish % already had three up days so that completed the positive shift. The rally to -15.0 showed a buy signal after a low pole formation to confirm its long term bullish status.

Sector Bullish% P&F Charts Higher:  

Bullish %
Holds bull alert.
Holds bull alert.
Holds bear correction.
Holds bull alert.
Holds bull alert.
Holds bear correction.
Utilities- Gas
Shifts to bull confirmed.
Wall Street
Holds bear correction.

Sector Sum Indicator:

Short term P&F chart status
    - 7.5
Change yesterday
Last reversal
21-Oct up to -37.0
Short term stop
Long Term P&F chart status
Last long term signal
P&F chart low pole at -27.0 on 24-Oct
Long term P&F stop loss
Potential bearish at -26.0 (high pole)
Last major resistance (& date)
+45.0 (Feb 12 highs)
Last major support (& date)
-46.5 (Sep 11 lows)


Sector P&F chart direction:

Total number of sectors
Last signal UP, # of rising groups
Trigger for bearish  status   
Sector charts overbought
Sectors charts oversold

Stock Action

The NYSE bullish % value gained 0.70% Friday. Its short term momentum is now positive and will remain so until there are three straight falling sessions. It closed at 50.75%, holding at X 50% on its chart. The NASDAQ Comp bullish % also hit X 50% on Wednesday. Both show rallies from 3-year lows.

Trading activity held at below above average levels with 457 stocks moving on their P&F charts. There were 480 changes the prior session. Volume fell 3.4% on the NYSE and 4.6% for the NASDAQ. Large traders remained on sidelines.

Sector Action

The Utility Gas bullish % was the strongest area amongst our groups on Friday, rallying 4.03%. That was enough to raise its status to the maximum level of “bull confirmed”. The move should extend from here, up to test falling trendline resistance at 76%.  We would consider trending stocks from the group.
Buy signals Friday were Energy Transfer Equity L.P. (ETE), TC Pipelines L.P. (TCP), Sunoco Logistic Partners L.P. (SXL) and Buckeye Partners L.P. (BPL). All the signals are favorable. TCP shows a neat reassertion of its long-term uptrend from the end of 2008. Record highs imminent for TCP.



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