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I'm attaching a set S&P cash charts with simple breadth indicators (a-d
issues and 10 period MA of h-l), one based on daily breadth statistics, the
other based on weekly. The daily breadth charts are turning rather positive
in the face of the decline, while the daily McClellan Oscillator (not shown)
on both the NYSE and NASDAQ has just broken out to the first new highs in
over 3 months. While the weekly breadth charts continue to paint a more
negative picture, the weekly McClellan Oscillator (not shown) has also just
crossed above zero for the first time in 3 months.
These favorable indications come in the face of both NYSE and NASDAQ
remaining at extreme levels (roughly 10%) above their 30 week moving
averages (like a very stretched rubber band), the TBill/EarningsYield
indicator remaining at the highest level in 70 years and the June S&P price
action signaling something amiss. Over some 30+ years of history, breakouts
of the weekly McO which occurred with the NYSE at extreme levels above its
30 week moving average have typically resulted in a market correction or
failure within 1-3 months except following deep corrections. All of this is
accompanied by compelling breakouts in the Ru2000 and in the Value Line
indexes; by strong rallies in economically critical commodities such as oil,
copper, and lumber; and a decline in rates which appears to be faltering. In
short, there are very few markets which are convincingly trending and many
which appear to be basing, topping, or changing direction.
Earl
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