Indicator Watch

INDICATOR WATCH 2010:

(January 3rd) It was a wild year on Wall Street and U.S. Stocks posted the biggest annual gain since 2003 after the Federal Reserve kept its benchmark interest rate near zero and global governments enforced massive stimulus programs to aviod the worst global recession since World War II. It was a lost decade for investors sticking to a Buy & Hold strategy and the old wisdom “buy a good stock, go to the next pharmacy, buy a sleeping pill and sleep, sleep, sleep” (André Kostolany) didn`t worked out. Investors who put $10,000 in stocks on Dec. 31, 1999, have $9,090 now, while the same amount in 10-year Treasury notes would have grown to about $18,000 following a 6.1 percent annualized return, according to data compiled by Bloomberg. Those who benefited in the decade were short-term investors and market timers like we are, able to take advantage of the volatility in the stock market.
For the week U.S. stocks plunged on Thursday in the final hour of trading after a slightly gain till Wednesday. The S&P 500 slipped 1 percent for the week to 1,115.10. The Dow Jones Industrial Average fell 0.9 percent to 10,428.05. Daytraders who watched the Upside-/Downside Volume Ratio Daily carefully could have seen, that the Upside Volume was already dropping sharply on Wednesday, not confirming the short term trend anymore.
Anyway, our Global Future Trend Index is still bullish for the long term and Upvolume is still above Downvolume, and Advances are above Declines for the longer investing horizon. Also the Trin Weekly went into bullish territory. Global Momentum (Charts of Interest) is still improving, reaching now a reading of 10.5%.
The trend has been broken for the short term (Trend Trader Index) and downside volume (Upside-/Downside Volume Ratio Daily) is dominating right now. Also the MACD is indicating that the S&P 500 is loosing momentum for the short term and Smart Money wasn`t holding up well. Our Large Block Index went into bearish territory showing that institutionals sold some of their holding.
Our bullish long term view hasn`t changed so far and for the short term we think the 9 week crash cycle (week 08.01.2010) will spook the markets in the first week of the new year before the powerful 48 week cycle (week 15.01.2010) and the 16 week cycle (week 22.01.2010) will help to continue the rally.

(January 10th) Last week U.S. stocks advanced, sending the Standard & Poor’s 500 Index to the biggest weekly gain in two months and the index posted its largest gain to start a year since 2006. For the week the S&P 500 rose 2.7 percent to 15-month high of 1,144.98, the Dow Jones Industrial Average advanced 190.14 points, or 1.8 percent, to 10,618.19 and the technology-focused Nasdaq Composite Index rose 2.6% on the week to 2,317. Financials were the biggest gaining sector this week, up 5.8 percent, followed by materials and industrials, which also rose more than 5 percent.
Well, the 9 week crash cycle was more or less a non-event as there was not really a macroeconomical trigger for it. The job report report was a disappointment but the revision for November showed 4,000 jobs were added that month, compared with the initial estimate that 11,000 were lost. That was the first job growth in two years.
Anyway, we stick to our bullish outlook as all of our Trend Indicators are extremly bullish at the moment. For the short term the Trend Trader Index is back on track, the mid-term Global Future Trend Index continued to grow strong last week and our Global Future Long Term Trend Index shows that the technical bull market is still in force.
This trend is widley confirmed by breadth as the High-Low Index Weekly is showing improvement as there are hardly any new lows and many stocks are reaching a new highs at the moment. Also the Advance-Decline Line Daily and the Advance-Decline Line Weekly reached a new high, which is confirmed by the Advance-Decline Volume Line. Upvolume is still dominating Downvolume in the mid and short term time horizon. The MACD is still above 0 and gaining momentum as well. Global Momentum continued to improve, now reaching a reading of 21% compared to 10.5% last week. If global Momentum will reach 30% a strong buy signal will be generated by our new WSC Global ETF Momentum Strategy.
After the strong rally last week the market is quite overbought accoring to our Upside-/Downside Volume Ratio, the Advance-/Decline Ratio Daily and the Global Futures Advance-Deline Indicator. Also Dumb Money is quite optimistic if we have a look to our ISEE Equity Call/Put Ratio, the Daily Put/Call Ratio All CBOE Options, the Global Futures Trading Index and the Global Futures Large Block Index.
But we will ignore those trend breaking divergences as long the trend is confirmed by breadth. Also we expect the powerful 48 week cycle (week 15.01.2010) to help the market to overcome the oversold condition. Any weaknesses should be reagarded as a great buying opportunity. Stay tuned!

(January 17th) Last week the bullish 48 week cycle helped the market to overcome their quite overbought condition, before U.S. stocks lost ground. On Jan 14th the S&P 500 was climbing to 1,148.46, the highest level since October 2008 before retreating on Friday. For the week the broad U.S. index lost less than 1 percent, closing at 1136.03. The Dow Jones Industrial Average lost 8.45, or 0.1 percent, to 10,609.56 and the Nasdaq shed 1.26% percent for the week.
Well, looking at both the daily and weekly Trend Indicators (Trend Trader Index, Global Future Trend Index and Global Future Long Term Trend Index), the uptrend has not been diminished in any way. The trend is still confirmed by market breadth if we have a look at the Trin Weekly and the High-Low Index Weekly, which was climbing to a new high last week, showing the market could be strong enough to break through the powerful Fibonacci Retracement-Level at 176.4% (Charts of Interest) in the long run.
But we expect some headwinds, if we will approach it. The Trend is also confirmed by Volume (Upside-/Downside Volume Weekly) and more stocks have been advancing than declining, indicating that the tape is still going strong. Well the MACD is growing slow indicating that momentum is likely to slow down and also our Global Momentum retreated, reaching a reading of 15% at the moment.
Dumb Money wasn`t scared enough at Friday and continue to be quite optimistic if we have a look at our ISEE Equity Call/Put Ratio, the Daily Put/Call Ratio All CBOE Options and the Global Futures Large Block Index.
We continue to ignore any trend breaking divergences as long the market trend is confirmed by breadth. We also expect the powerful bullish 16 week cycle (week 22.01.2010) next week, and any weaknesses should be regarded as great buying opportunity!

(January 24th) It was a wild ride on Wallstreet last week. On Thursday the bullish 16 week cycle came right on time, lifting the Dow and the S&P 500 to fresh 15-month closing highs. The S&P 500 nearly reached the 176.4% Fibonacci Retracement (Charts of Interest) but was not able to push through. As we mentioned last week, we expected some headwinds in that area. The headwinds had been coming from President Obama’s plan to crack down on Wall Street’s risk taking and fears that China's curbs on bank lending might jeopardize the global economic recovery.
For the week the S&P 500 erased its 2010 gain, retreating 3.9 percent to 1,091.76. The Dow Jones Industrial Average fell 436.67 points, or 4.1 percent, to 10,172.98, and the Nasdaq Composite Index decreased 3.6 percent to 2,205.29. This was the worst week for U.S. stocks since March.
Well, the short term trend has turned into bearish territory according to our Trend Trader Index and the MACD is showing negative momentum at the moment. Also our Upside-/Downside Volume Ratio Daily is confirming the short term down trend. But as short term downside volume reached a new high, there is a great chance of a rebound at the moment.
Our midterm orientated Global Future Trend Index continued to grow strong and our Global Future Long Term Trend Index is still in force, not confirming the talks about the start of a new bear market. Also Global Momentum hasn`t been affected by the downturn last week. If we have a look at our Breadth Indicators (Advance-Decline Line Weekly, Advance-/Decline Index Weekly and the High-Low Index Weekly), we could see that acutally only the heavy weighted stocks have pulled down the major indices, but the broad market is still quite robust. Upvolume decreased but still dominating downvolume in the long run. A strong buy signal comes from our Global Future Trading Index and our Global Futures Bottom Indicator shows that the bottom is at hand. The Trin Weekly is still in bullish territory and Dumb Money was quite scared last week (ISEE Equity Call/Put Ratio, Daily Put/Call Ratio All CBOE Options). We also expect a strong support level at the 150% Fibonacci Retracement (Charts of Interest) and we would advise our long term oriented clients to continue averaging down their portfolios. Day Traders should use extremely close stopps if they are long. Stay tuned!

(January 31st) Last week U.S. stocks declined and logged their worst month in nearly a year. For the week S&P 500 decreased 1.6 percent to 1,073.87, bringing its January retreat to 3.7 percent. The Dow Jones Industrial Average fell 105.65 points, or 1 percent, to 10,067.33 and the Nasdaq shed 2.7%.
Well after the strong rally which has started in March 2008, most of our sentiment indicators have been pushed to excessive optimism zones, leaving the markets quite vulnerable to dissapointments. That is what we are seeing right now. But our long term bullish view hasn`t changed so far. If we have a look at our mid to long term oriented trend indicators (Global Future Trend Index, Global Future Long Term Trend Index), they haven`t been affected by the downturn and their gauges are still extreamly bullish. Also the mid to long term oriented breadth indicators (High-Low Index Weekly, Advance-/Decline Index Weekly) are confirming the longterm uptrend and 98% of 42 markets which we are monitoring are still above their 40 weeks moving averages.
The picture for the short term is different. Most of our short term trend indicators (Trend Trader Index, MACD) are showing a clear bearish trend at the moment which is confirmed by short term breadth (Upside-/Downside Volume Ratio Daily, Advance-Decline Line 20 Day Momentum).
Since our reliable Global Futures Bottom Indicator even got stronger, therefore we think the bottom is at hand. Furthermore our Advance-/Decline Ratio Daily shows that the market is extreamly oversold, the Global Future Trading Index and the Trin Weekly are still in bullish territory and the option market is quite scared (Daily Put/Call Ratio All CBOE Options). It could be possible that the market will go down a bit further until the the S&P 500 high line will close slightly below the 150% Fibonacci Retracement Level, before the new uptrend might start (Charts of Interest). Also most of the the Program Traders at Nyse are selling heavily into the market, which is a clearly bullish sign for contrairians and we expect the bullish 7 week cycle next week (week 05.02.2010). This setback could be seen as a great buying opportunity for latecomers.

(February 7th) Last week the bullish 7 week cycle came right on time and kicked off February with a rally. On Monday the Dow Jones Industrial Average rose about 120 points, or 1.2 percent and the S&P 500 gained 1.4 percent. On Tuesday the rally continued and the Dow Jones Industrial Average logged its second straight triple-digit gain, rising over 111.32 points, or 1.1 percent and the S&P 500 gained 1.3 percent. This was the best two-day gain for the broad U.S. index since October. Stocks struggled on Wednesday and on Thursday the Dow Jones Industrial Average fell below 10,000 for the first time since last November, before popping back up a few points to end at 10,002.18. The S&P 500 shed 3.1 percent and the Nasdaq dropped about 3% on that day. On Friday U.S. stocks had a stunning comeback, after being down sharply for most of the day. The Dow Jones Industrial Average was even falling below 9,900, before Smart Money was buying aggressively in the last trading hour, pushing the index above the 10,000 mark. It was already our guess last week, that the S&P 500 high line would drop below the 150% Fibonacci-Retracement-Level (Charts of Interest), before Smart Money would jump into the market. On Friday the biggest gainers were technology and materials, two of the most beaten down sectors in the recent rout.
For the week, the Dow Jones Industrial declined 0.55%, the S&P 500 lost 0.72% and the Nasdaq shed 0.29%.
Well our short term trend indicators are still showing a downtrend at the moment (Trend Trader Index, MACD) but the gauges of our mid- to long term trend indicators (Global Future Trend Index, Global Future Long Term Trend Index) are still bullish, indicating that this correction is just a normal part of the long term uptrend. This rout could also be described as “rubber band effect”, which mostly occure in strong uptrends. If the market is rising to high above the 200 day moving average, it is mostly being pulled back and this could be seen as a healthy behaviour of the market. The long term uptrend is still confirmed by breadth (High-Low Index Weekly, Advance-/Decline Index Weekly). As already mentioned above, Smart Money was buying heavily into the market, if we have a look at our Smart Money Flow Index, which was holding up quite well last week, not confirming the new low of the Dow. The Small Fry is buying heavily puts, if we have a look at our Daily Put/Call Ratio All CBOE Options which is exactly the opposite behaviour of the smart guys. Also our Global Futures Large Block Index turned into bullish territory and the Program Traders at NYSE continued to be extreamly short, which could be seen as a clear bullish sign for contrarians.
Our reliable Global Futures Bottom Indicator still shows a clear buy signal, as well as the Global Futures Trading Index and the Market Timer Index. We think, this could be the last chance for latecomers getting into the market that cheap!

(February 14th) It was a wild ride on Wall Street, but in the end the bulls were dominating and U.S. stocks snapped a four week losing streak. For the week the S&P 500 rose 0.87 percent to 1,075.51, the Dow Jones Industrial Average also added 0.87%, to 10099.14 and the Nasdaq Composite Index rallied 1.98 percent to 2183.53.
Well, our short term trend indicators (Trend Trader Index, MACD) are still indicating a down trend but apart from that, most of our indicators are outright bullish at the moment:

Mid- to long term Trend Indicators and Market Breadth are still extreamly bullish:

- Global Future Trend Index (mid term uptrend is still strong)
- Global Future Long Term Trend Index (long term trend is still in force)
- Advance-/Decline Index Weekly (breadth is still supporting the Bulls)
- High-Low Index Weekly (breadth is still supporting the Bulls)

Signs of capitulation

- Bull & Bear AII (more Bears than Bulls)
- Global Futures Sentiment Index
- Daily Put/Call Ratio All CBOE Options
- Global Futures Put/Volume Ratio

Smart Money is buying aggressively and the Small Fry sells!

- Smart Money Flow Index (Bargain hunting by Smart Money)
- Global Futures Dumb Money Index (Small Fry is selling like hell)
- Market Timer Index (Clear Buy Signal)
- Program Traders are short!

That does not necessarily mean that the market will take off immediately. Many investors closed their short position since the long weekend is ahead. Perhaps there will be another downleg next week, motivating investors to go short, before the market will squeeze them. But we believe, that it is time to buy for bargain hunters, who can stomach a few more days of volatility. According to the Barron’s Gold Mining Index, Gold-Stocks are also quite interesting at the moment.

(February 21st) Last week U.S. stocks advanced the most in more than three months. After a four-day winning streak, the Dow Jones Industrial Average rose 303.21 points, or 3 percent, to 10,402.35 and the broad S&P 500 Index advanced 3.1 percent to 1,109.17. The Nasdaq gained 2.76% and Gold rallied to $1,1220.1 an ounce. Stocks even managed a gain on Friday, after the Fed unexpectedly was raising the discount rate by a quarter of a percentage points to 0.75 percent.
According to the so called “Market Experts” (who talked about the start of a new bear market 3 weeks ago), the reason for the gain was, that the market had already priced in such a move by the Fed. Well, in the end, it was the same old game like always: The Small Fry have been short like hell and Smart Money squeezed them.
Anyway, the short term oriented Trend Trader Index is back on track and the MACD shows that the market is gaining momentum at the moment. The mid- to long term oriented trend indicators haven`t changed and they still remain bullish (Global Future Trend Index, Global Future Long Term Trend Index) and the trend is widely confirmed by breadth (Upside-/Downside Volume Ratio Daily, Upside-/Downside Volume Weekly, High-Low Index Weekly, Advance-/Decline Index Weekly). Furthermore, the Advance-Decline Line Daily reached a new high, indicating that the breadth will be strong enough to push the market through the strong resistance at the 161.80% Fibonacci Retracement Level (Charts of Interest) and even to new highs in the long run!
Smart Money continued to buy into the market and Dumb Money is still quite short according to the Program Traders, the Daily Put/Call Ratio All CBOE Options, and the Global Futures Dumb Money Index, which is a clearly bullish sign for contrarians.
After the big upmove last week, the market is quite overbought according to the Upside-/Downside Volume Ratio Daily, the Advance-/Decline Index Ratio Daily and the Global Future Trading Index. Any weaknesses should be regarded as a great buying opportunity!

(February 28th) U.S. stocks slightly declined last week but logged in solid gains for February. The Dow Jones Industrial Average lost 0.74% for the week but is up 2.6% for the month, its best performance since November 2009. The S&P 500 shed 0.42% for the week, on a monthly basis the broad index is up 2.9% while the Nasdaq rallied 4.2% in February.
The month has turned out to be a good one for those who had a strong bullish opinion like we have, but it must have been an upsetting one, for those who made trading on an emotional basis influenced by the daily swings of the market or believed there is a start of a new bear market ahead. Especially last week, we have seen a lot of smart buying after the indices had been down the whole trading day but reversed in the last trading hours. Actually during a technical bull market (Global Future Long Term Trend Index = bullish), there are on average three corrections of 6% or more a year. So the recent 8% setback was nothing to worry about and now the S&P 500 already gained about 4.5% since the recent low.
All of our trend indicators, measuring the short-, mid- and longterm trend are bullish at the moment (Trend Trader Index, Global Future Trend Index and Global Future Long Term Trend Index). This trend is widely confirmed by nearly all of our indicators covering the breadth of the market. The High-Low Index Weekly, which measures the amount of the daily new highs/new lows of all stocks listed at Nyse, is still confirming the long term trend, as the new highs are still dominating the new lows.
Upvolume is dominating downvolume on a daily and weekly basis, confirming our bullish view. There are also more stocks advancing then declining and our Advance-Decline Line Daily made a new high, indicating that the broad market, especially small caps are growing strong, and only the heavy weighted stocks are holding down the major indices. According to The MACD and our Advance-Decline Line 20 Day Momentum, the market is gaining strong momentum at the moment. In the meantime, Smart Money continued to buy into weaknesses (Smart Money Flow Index), which was holding up quite well in the last sessions and Dumb Money is still bearish if we have a look at the Global Futures Dumb Money Index, the Daily Put/Call Ratio All CBOE Options and the Put/Call Ratio OEX. Sentiment is favouring our bullish view, as the Global Futures Sentiment Index continued to drop, and the Bears are still dominating the Bulls, which could be seen as a bullish sign as there is still enough money around which could be invested. Also the Program Traders at Nyse closed their extreme short positions and went back to normal.
As our Global Future Global Momentum Indicator is still below 30%, therefore we expect some strong volatility ahead, since the market is quite vulnerable to negative news flow. Apart from that, the big picture is quite clear from a technical point of view, and for those who are able to cope with volatility, we would quote Warren Buffett...... remarks: “Buy Americans, buy”. Stay tuned!

(March 7th) Last week U.S stocks rallied and the Dow Jones Industrial Average advanced 2.3 percent to 10,566.2, while the broad S&P 500 climed 3.1 percent, closing Friday at 1,138.7. The tech-heavy Nasdaq Composite jumped even 3.6 percent, to 2.326.35, hitting an 18-month closing high on Friday.
The so called “Market Experts” have stated that the market was going strong due to a sigh of relief that the job loss in February was not as bad as expected. If the stock market would have been down for the week, they maybe would have blamed the ISM manufacturing index, which fell to 56.5 from 58.4 in January or even they would have said, that investors are still concerned about the housing market as construction spending fell for a third straight month in January, to its lowest level since June 2003.
Anyway, most of our indicatos have not changed from last week (Trend- and Breadth Indicators as well as Dumb Money continues to be short) and therefore we gonna stick to our bullish outlook. After the strong rally last week, the market is heavily overbought according to Advance/Decline Ratio Daily, the Upside-/Downside Volume Ratio Daily, the Advance/Decline 20 Days Momentum Indicator and the Global Futures Trading Index. Also the Upside-/Downside Volume Index Daily reached a quite high reading indicating that the chances are quite high, that the market will take a break next week. Smart Money was not going that strong as the market did and we also expect the 9 week crash cycle (week 12.03.2010) to spook the market. Therefore, we think it could be possible to see some weaknesses ahead next week, but nothing really to worry about as this would be a healthy behaviour of the market after such a strong upmove. We stick to our bullish outlook for the long term and any weaknesses should be regarded as a great buying opportunity.
P.S: Since February 14th, the Philadelphia Gold and Silver Index rose nearly 4.2%.

(March 14th) U.S. stocks ended mixed Monday, eked out a modest gain Tuesday, ended higher Wednesday and Thursday and struggled Friday, but in the end managed to pull off a gain for the week. The Dow Jones Industrial Average rose to 10,624.69, leaving it with a 0.6% weekly gain, the S&P 500 reached a 17-month high on Thursday at 1,150 and fell fractionally to finish at 1,149.99, leaving it up 0.99% for the week, while the Nasdaq advanced 1.78% to 2,367.66.
All in all markets have been quite boring last week but as we have already mentioned in our last comment, we think this could be seen as a healthy behaviour of the market. So not even an unexpectedly rise in retail sales or in mortgage applications wheather a more than expected drop in initial jobless claims or consumer sentiment had been any trigger for a big move.
All of our trend indicators, measuring the short-, mid- and longterm trend are bullish at the moment (Trend Trader Index, Global Future Trend Index and Global Future Long Term Trend Index). This trend is widely confirmed by nearly all of our indicators covering the breadth of the market (High-Low Index Weekly, Upside-/Downside Volume Index Weekly, Upside-/Downside Index Daily, Advance-/Decline Index Weekly). Advance-Decline Line Daily, the Advance-/Decline Line Weekly as well as the Advance-/Decline Volume Line have reached new highs, indicating that the market will be able to push through the strong 176.4% Fibonacci Retracement Level (Charts of Interest) in the long run. The market is also gaining strong momentum (MACD, Advance-Decline Line 20 Day Momentum) and Dumb Money continued to be short (Global Futures Dumb Money Index, Daily Put/Call Ratio All CBOE Options Indicator) while Smart Money was quite neutral last week. The overbought condition of the market has not changed that much if we have a look at our Daily Advance/Decline 20 Days Momentum Indicator, the Global Future Trading Index, the Trin Weekly and Trin Daily. We are a bit concerned about the ISEE Equity Call/Put Ratio, which is a way to high in our opinion. Our bullish view has not changed but we think it could be possible to see some more weaknesses ahead and that the market will need a few attemps to break through the strong Fibonacci Retracement Level. Stay tuned!

(March 21st) U.S. stocks snapped an eight-day winning streak on Friday, but still managed to be up for the week. The S&P 500 climbed 0.86 percent to 1,159.9 and therefore managed to close slightly above the 176.4% Fibonacci Retracement Level. The Dow Jones Industrial Average gained 117.29 points, or 1.1 percent, to 10.741.98 while the Nasdaq Composite Index rose 0.26 percent to 2374.41.
The decision from the Federal Reserve to keep the interest rates near zero was no big suprise and this is supporting our long term bullish view.
We think the rally will continue until we see excessive optimism by Dumb Money and big divergences from our breadth indicators that would warn of trouble ahead. The S&P 500 managed to break through the strong Fibonacci Retracement Level easily (although we thought the market will need a few attemps - Charts of Interest), indicating that the overbought condition of the market was offsett by heavy breadth.
All our trend indicators (Trend Trader Index, Global Future Trend Index and Global Future Long Term Trend Index) remain bullish and the trend is still strongly confirmed by breadth (High-Low Index Weekly, Upside-/Downside Volume Index Weekly, Advance-/Decline Index Weekly, Advance-/Decline Volume Line, Advance-/Decline Line Weekly, Advance-/Decline Volume Line).
The momentum of the market continues to be strong according to the MACD and our Advance-Decline Line 20 Day Momentum Indicator. The ISEE Equity Call/Put Ratio is reducing, Dumb Money continues to be cautious and the overbought condition of the market has reduced significatly as only our Daily Advance/Decline 20 Days Momentum Indicator remains high.
The new high of the Dow Jones is confirmed by Smart Money in the short run as the gauges of the Smart Money Flow Index is higher than the ones from the last high, but is lagging in the long run, as the readings of the SMFI are not that high than in October 2009. This is telling us, that we might will see some major weaknesses, after the breadth of the market will reduce significatly and will not support the bulls anymore.
But until then we stick to our bullish opinion and any upcoming weaknesses (Upside-/Downside Index Daily turned bearish) should be used to buy aggressively into the market. We also expect the bullish 7 week cycle this week (week of March 26th).

(March 28th) Last week the bullish 7 week cycle appeared right on time and U.S. stocks rose for a fourth week, sending the S&P 500 to its longest winning streak since August 2009. On Thursday U.S. stocks reached new intraday highs before profit taking by Smart Money set in. For the week, the Dow Jones Industrial Average rose 103.38 points, or 1.01 percent, to 10.860.36. The S&P 500 climbed 0.58 percent to 1,166.59 while the Nasdaq advanced 0.87%, to 2,395.13. The month turned out to be a good one, for those who shared our bullish view (take a look at our Market Watch February 28th – “Buy Amercians, buy”). For the month, the Dow Jones Industrial Average climed 5.08%, the S&P 500 gained 5.68%, while the Nasdaq rallied 7.01%.
There should have been a key reversal day on Thursday (a strong technical chart pattern, indicating a trend reversal) which caused some concerns among Technicians. The Dow Jones Industrial Average was up nearly 120 points on Thursday and then lost ground, closing 5 points higher than the previous day. But the definition of a proper key reversal day is, that a new high is made during an uptrend and is followed by a lower close than the previous day's closing price or previous day’s low, which did not occure as the Dow closed with a slightly gain on that day. In our opinion, Smart Money just took profits as on Friday, U.S. GDP and other important macroeconomic data had been released, leaving room for disappointments.
Anyway, the big question is, if stocks are able to push higher as the second quarter gets underway? After studying the behaviour of the market after the end of several bear markets, we are expecting a correction phase in Q2-Q3 (after a strong first quarter), but right now, we are still on maximum overweight equities.
If we have a look at our longer term oriented indicators, all of them are extremely bullish at the moment, indicating the market will be able to push higher in the long run. Our Global Future Long Term Trend Index is still confirming the technical bull market, the High-Low Index Weekly continues to be strong, since U.S. stocks keep making new highs and there are hardly any new lows, which is widely confirmed by volume and breadth. This is also confirmed by our Advance-/Decline Line Weekly and the Advance-/Decline Volume Line which have been reaching new highs, indicating that the tape is still growing strong.
For the short term, the market is also in a strong trend according to our Trend Trader Index and our Global Future Trend Index which is confirmed by short term volume. The MACD is slowing down but still in bullish territory and our WSC Global Momentum Indicator triggered a strong buy signal because 47.4% out of 19 markets are gaining strong momentum. (Now members could follow our ETF Momentum Strategy, as the 30% hurdle have been passed).
According to the Trin Daily and the Global Futures Advance-Decline Indicator the market is still slightly overbought. There was also some profit taking by Smart Money and the ISEE Equity Call/Put Ratio remains high, which could be seen as a bearish signal. But we ignore any trend breaking divergences as long as breadth is confirming the trend. There is a potentiality that the market will take a break next week, after a four weeks winning streak and therefore any weaknesses should be regarded as great buying opportunity as we think the next strong resistance level will be the 200% Fibonacci Retracement Level at 1220 (Charts of Interest) for the S&P 500 in the long run! Stay tuned!