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US Stock Service
Daily Hotline
 
4 April 2014    By John Gray
Market Action
  • The market advance failed to carry through for a fifth session Thursday although the first minutes did include higher levels and a new record for the DJ Industrial Average. Trading quickly turned down with negative readings most of the session before late buying lifted the averages up at the close.
  • That was still negative with the smaller shares underperforming. Lower volume trimmed away some of the potential impact of the NASDAQ weakness and generally the markets were waiting for the important jobs data later today. Expectations are for another solid reading that could confirm the economies building strength into spring and summer.
  • There was some new biotech selling and some large NASDAQ firms showed new weakness in the context of very powerful upmoves over the last year. Index charts have all surged back to prior chart highs and need some new stimulus to breakout above there. Good news on jobs may provide than but in the perverse ways of Wall Street the following conclusion would be ‘what else is there to drive shares higher' and some new selling could occur.
  • That scenario of an upcoming top is also suggested by many moving average breadth indicators which have also returned to their prior top levels, particularly for the NYSE.
  • We expect a better economy this summer and possibly higher markets later this year. In the near term the stock market is setting up for another corrective pull back.
Market Drivers
  • Yesterday's first time jobless claims increased slightly more than forecast but the four-week average remained near six-month lows. Economists predict employers added 200,000 non-farm jobs in March so any higher reading will be good news.
  • The US non-manufacturing sector also saw an increase in March. That ISM report followed good news on industrial output as well.
  • Facebook, Netflix and Tesla each fell more than 2%, contributing to the NASDAQ's weakness. The NASDAQ 100 is doing even worse.
Technical Outlook
  • Yesterday saw new chart highs for the DJ Industrials but overall the session was quiet in front of jobs data today. Many index charts show trading back at prior top levels with a few at new highs. Some digestion of the gains is occurring as resistance levels are tested. Indicators show bullish status. Many NYSE oscillators also trade at or near prior overbought highs limiting their further potential. If today's data is good the remaining broad averages could also return to their highs. The resulting attention should draw in new public funds and that could result in a final top.
Portfolios
  • Large Caps 50% invested, Mid Caps 30% and Small Caps 35%.
  • Bear Portfolio is 40% short.
 Indicators
Short Term Medium Term
II Short Term Composite Indicator
60.3% (-3.50%)
Bull Confirmed
NYSE %10 Week Moving Average
72.77% (-2.67)
Bull Confirmed
II Short Term Sector Sum
-17.50    (n/c)
Caution
New P&F Signals: US Breakouts
Close 1-Day Change
Bulls 14 -20
Bears 10 +4
NYSE Bullish % Indicator
65.91% (+0.23%)
Bear Correction
NYSE %30 Week Moving Average
74.09% (-1.49)
Bull Confirmed
II Long Term Composite Indicator
+12.00     (weekly)
Neutral
  • The short term composite was steady at X 62%, pausing at its resistance trendline.
  • The primary % 10-wk MA charts were steady and positive. The NASDAQ 100 chart reversed down.
  • The stock breakout difference narrowed but remained positive.

  • The daily NASDAQ high low ratio dropped out of overbought territory for its initial bearish signal.
  • Other medium term charts were steady.
  • The NYSE bullish % would strengthen with a low pole formation if it hits 66.00%.

Index Trends
  Close Volume 1-Day Change P&F Signals Support
Signal Trend Start Date Trend Reversal
DJ Industrials 16,572.5 78.1m -0.45 -0.0% Bull Up 3 Apr 2014 16,000.00 15340.7/16006.6
S&P 500 Index 1,888.77 465.1m -2.13 -0.1% Bull Up 28 Feb 2014 1,840.00 1737.92/1824.58
NASDAQ Comp. 4,237.74 497.5m -38.72 -0.9% Bull Down 2 Apr 2014 4,120.00 3968.19/4131.81
NASDAQ 100 3,637.58 154.2m -28.41 -0.8% Bear Up 24 Mar 2014 3,720.00 3418.88/3543.07
S&P Midcap 400 1,389.15 100.2m -5.51 -0.4% Bull Up 1 Apr 2014 1,345.00
Russell 2000 Index 1,181.12 279.3m -11.69 -1.0% Bear Up 24 Mar 2014 1,195.00
Closing prices through Thursday April 3, 2014
Chart Activity - Broad Index Moves 


The four-day rally ended Thursday as traders' awaited guidance from the employment data today. After small gains at the open the NYSE averages moved sideways to finish fractionally lower. The NASDAQ Comp and Russell 2000 suffered much more, with losses exceeding 1.5% late afternoon. Both rebounded to the close, ending with losses just under 1%. Declining shares outnumbered advancing issues for another negative. However volume also contracted and that signaled large traders were not selling. The overall uptrend held with many index charts at the areas of recent highs.

The new chart activity was limited. The positive open saw the DJ I achieve a new record above 16,600, moving both the long [100 pts/box] and short term [50 pts] charts to that level. The 100 pts chart had a triple top breakout to a high. That also sets up a potential negative bull trap if it reverses down without any further gain. The short term chart move produced a high pole stop at O 16,350. The only other moves were reversals down for the NASDAQ Comp and S&P Small-Cap charts. Both remained bullish but unlike the NYSE indexes neither achieved a new high this week.

Chart Activity - Sector Indexes 

The sector chart activity was mixed. The DJ Transport Averages chart held its high along with the utility averages. Amongst the slow moving S&P 500 groups the Energy and IT set strong highs yesterday while the Health Care chart neared it's high. The Cyclical CYC and Semiconductor Sox also set further records but the Biotech BTK reversed down without a breakout.

Chart Activity - Commodities

Spot gold slipped back below $1290. The chart held its decline to O $1280 with a bearish high pole formation. It is down from a recent peak at X $1390. The two gold indexes [XAU & HUI] were unchanged. Both hold just below new trading buy signals. On 22-January the Precious Metals bullish % reversed up from O 8%. It moved up to X 52% on 14-Mar. On 26-Mar it reversed down, shifting to bull correction status.

Crude oil had a small gain to close back above $100. The chart held its prior-day retreat to O $99. That lowered the buy stop to X $103. Until then it holds a negative high pole formation with the stop loss at O $97. The energy index [OSX & XOI] charts remain strong. The OSX chart holds near its high and the XOI chart is at a high.

 

Index Breadth

% 10 Week Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 72.77 -2.67 Bull Confirmed 1 Apr 2014
Nasdaq Composite 58.38 -5.62 Bear Correction 31 Mar 2014
S&P 500 80.8 -1.13 Bull Confirmed 31 Mar 2014
Nasdaq 100 54 -7.00 Bear Confirmed 3 Apr 2014
Option Stocks 72.26 -3.69 Bull Confirmed 1 Apr 2014
% 30 Week Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 74.09 -1.49 Bull Confirmed 1 Apr 2014
Nasdaq Composite 67.63 -2.27 Bear Correction 1 Apr 2014
S&P 500 85.8 -0.55 Bull Confirmed 31 Mar 2014
Nasdaq 100 74 -3.00 Bull Confirmed 1 Apr 2014
Option Stocks 77.21 -2.03 Bull Confirmed 31 Mar 2014
Bullish % Close 1-Day Change P&F Trends
Signal Status Date Changed
NYSE 65.91 +0.23 Bear Correction 4 Mar 2014
Nasdaq Composite 60.98 -0.06 Bull Confirmed 27 Feb 2014
S&P 500 73 +0.11 Bull Confirmed 24 Feb 2014
Nasdaq 100 58 -1.00 Bear Confirmed 13 Mar 2014
Option Stocks 69.06 +0.49 Bear Correction 4 Mar 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.

Short-term:

Activity slowed Thursday and the NYSE averages ended slightly lower with negative breadth. The NASDAQ ended down 1% with weak internals. The overall MA status is positive but many readings are also near prior top levels so the upside momentum is much slower than a week ago. The NASDAQ 100 short term %10-wk MA chart reversed down and that NASDAQ Comp indicator missed that by only 0.38%. They were the only two without bull confirmed status and below overbought territory. The NDX downturn lowered its buy stop for bull confirmed status to X 64%.  The three NYSE focused indicators have returned to overbought territory and are close to prior peaks. Downturns would call for caution.

Medium-term:

The % 30-wk MA charts were steady. The S&P 500 is above its March high and NYSE equaled that level. For the NYSE the X 74% reading is a high since Oct-13 when its reached X 78%. The NASDAQ Comp is still near overbought status. That would shift it to bull confirmed status. The NASDAQ Comp chart shows three prior three chart tops at X 76% shown over the last year.

Long-term:

The daily breakout ratio narrowed but remained positive with 14 new buys and 10 new sells. That contracted the bullish % value differences and the two NASDAQ readings fell. The NYSE ended just below the 66.00% its needs for a low pole formation that would point to more gains and a 70% reading. Rising direction holds for all but the NASDAQ 100.

Current outlook:

Yesterday showed no significant moving average breadth indicator activity as markets awaited today's data. The main % 10-wk MA charts remain bullish with the NYSE focused indicators approaching prior peak readings, which are the targets. Good news today could see a market spurt that may mark a new top. The positive direction on all five 30-wk MA charts is a confirmation of the near term direction, and those slower moving charts are even closer to previous peaks. Index chart now face resistance at their highs. Then watch for downturns and as we could be near a major top.


 

Indicators

Close Change Chart Direction Chart Status Chart Action
Short term Composite Indicator 60.3 -3.50 Rising Bullish None
NYSE High-Low Index 86.35 +1.95 Rising Bullish HIgher
Nasdaq High-Low Index 67.75 -0.48 Falling Bearish Lower
NYSE On Balance Volume (by DJIA) 267,182 -660.00 Rising Bullish None
NYSE On Balance Volume (by breadth) 527,006 -661.00 Rising Bullish None
Nasdaq on Balance Volume by Composite 476.07 -2.03 Rising Bullish None
Nasdaq on Balance Volume by Breadth 48.56 -2.03 Rising Bullish None
NYSE Cumulative Advance/Decline 390,541 -571.00 Rising Bullish None
NYSE Money Flow Index 45,413.4 (weekly) Rising Bullish None

  • The rally halted ahead of the monthly jobs data and the NASDAQ ended weak. One set of negative readings rarely reverses rising indicator charts so upward direction held. There was also a negative decline. The short term direction is up with the averages facing resistance at prior highs.  
  • The daily short term composite chart was steady at X 62%. That Wednesday rally tests resistance from the downtrend line from the end of 2013 high at X 82%. That trendline turned down the last rally. The status holds bull confirmed and projects market gains until it approaches prior overbought readings at 70% and above.
  • The one-day NYSE data remained strong so that medium term daily high low chart advanced another box to X 86%. It is back near top levels at 90% and above after reversing up two-days ago. However the NASDAQ readings weakened enough to move that high low ratio lower to O 68%. That drop out of overbought territory without a P&F sell produces bear alert status. Sometimes it can turn back up but that shift often leads to lower markets, with the NASDAQ relatively weaker than the NYSE.
  • Other charts were steady and positive.

Industry Bullish %s and Sector Sum
Daily Industry Groups Bullish %s: The daily breakout ratio was positive for the fifth straight session Thursday but with only 14 new buys and 10 new sells the difference narrowed considerably from the prior two days. That also trimmed the activity amongst the 46 industry sectors with only one move down. It wasn't a reversal or status shift. That left the sector sum value steady and still signaling caution until it reverses up. The unchanged Utility-Gas bullish % improved 2.41%, ending just 0.14% below its potential upturn to X 64%.

The sum chart shifted long term bearish status shift on 27-January. It still holds a low pole retracement of its decline. That projects an upcoming buy signal before a return to the chart low at -20.5. The buy stop is now +3.0.  

The sector sum value was -17.5. A reversal up would occur at 14.0. The Bell Curve almost reached the classic pattern that is typical at the end of a market correction around 6-February and then moved decidedly to the ‘right'. Last week it showed the majority of groups between 50% and 70%.  

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 %. On 14-February the sector sum chart reversed up. The A-D line and NYSE bullish % elements were already positive so that completed the bullish shift. On 17-Oct the long term sector sum status shifted bearish with a new P&F chart sell signal. That ended the buy from 17-Oct-13. At present a rally to +3.0 is needed for a long term buy signal.

 

 
Sector Bullish% P&F Chart Lower:

Sector
Bullish %
Comment
Energy- Other
38%
Holds bear confirmed.



 

 
Sector Sum Indicator:


Short term P&F chart status
 
Caution
Value
    -17.5
Change yesterday
      0.0
Last reversal
24-Mar down to -1.0
Short term stop
    -14.0
Long Term P&F chart status
Bearish
Last long term signal
P&F chart Sell + 10.0 on 27-Jan
Long term P&F stop loss
Potential bullish at +3.0.
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
46
Last signal Down # of rising groups
22
Trigger for bullish status   
25
Sector charts overbought
 9
Sectors charts oversold
1

 
 
 
 
 
 

Stock Action

The NYSE bullish % gained 0.23% yesterday, its fifth consecutive gain. Its momentum is positive until it falls three days in-a-row and that hasn't occurred. It closed at 65.91%. The chart remains at X 64 but will move up today with a small 0.09% gain. That would strengthen its chart with a low pole formation.

Trading activity slowed to well below average levels with 329 stocks moving on their P&F charts. There was an average 453 moves the prior day. Volume fell 2.5% for the NYSE and 5.1% for the NASDAQ. That lower activity reflected large traders were again on the sidelines, prior to today's monthly employment report.



Sector Action

The Utilities Gas bullish % was one of the better performers yesterday, up 2.41%. The chart is now just 0.14% away from reversing up, a move which would activate a more positive status of "bear correction". That move could well occur today. Following that we would expect a return to the 80% region.

There were two buy signals yesterday, TransCanada (TRP) and TC PipeLines L.P. (TCP). Both charts show reassertions underway of long-term uptrends. TRP is neatly resuming its uptrend with a triple-top breakout yesterday. A push to record highs is likely over the short-term. New longs could use the 2014 low of $42.21 as a stoploss.

 

 

 

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