Saturday, August 20, 2016

Summer Doldrums

Well, August is upon us and with it the attendant light volume which is often vacation related, particularly in some countries in Europe where the month of August is the month for time off.

While we are waiting for further directional signals, here are a couple of charts that may be of some interest.

NYSE Weekly Summation Index Has Stochastic Cross
NASDAQ Weekly Summation Index Has Stochastic Cross

And, while both of the above indicators have indeed led to substantial declines in the past because of flagging market breadth, there have often been modest price recoveries before they do.

And here is the recent daily S&P500 Index cash chart.

SP500 Daily Cash Index

While the lighter volume in August is plain to see versus July, we also note that there are two gaps now above the market. The market spent most of the day Thursday trying to fill the first gap down but couldn't quite do it. And then, there was a repeat performance on Friday - also without a gap fill.

Friday's candle pattern is 'potentially' a hanging man candle. It has to be confirmed by lower close candles and lower low candles. Without such confirmation, the candle could be a hammer candle.

The bottom line is that while there is the lower high component of a down trend visible since the 15 August high, the lower low component of a down trend is currently not in place.

Therefore an update of the specific Elliott Wave count requires a break of either 15 Aug high, or the 17 Aug low.

Regardless, the downward move so far has been quite slow with small point change, and, so far, if one also considers the presence of gaps at the highs, we think the down move will eventually turn out to be corrective. Even if it gets more impulsive to the down side, it may only be the start of Minor A, of Intermediate (2).

Are new highs possible from here? Yes, they are - so again, from a counting perspective, we are largely neutral awaiting more confirming information.


  1. Joe, always appreciate your work. You mentioned NASI in your post . . . thought I'd add to your observation. I follow the Summation Index closely and use this chart, which includes McClellans Osc and breadth relative to the SPX, to generate buy and sell signals. Based on past signals, a signal to go to cash is just a hair's breadth away. A signal to sell short requires sufficient deterioration in breadth to create a divergence. This suggests that any near term weakness will be relatively minor.

  2. NYSI and NASI are end of day breath indicators that often diverge with price...BPCOMPQ is an excellent real time, stand alone trend indicator...utilize a customized 60 minute BPCOMPQ chart to identify changes-in-trend...