Saturday, August 4, 2012

Observations on an internally weak, price-strong rally toward resistance: 8/4/12 review

Folks, once again we can celebrate new stockmarket highs while continuing to be concerned about resistance levels and concerning indicators. In this post, I'm continuing my new format of providing links to the great work of other folks, where it's available, interweaving my own observations (and will post such other analysts work in the entirety if it isn't available elsewhere). The observations from last week projecting to a low on August 2 worked out incredibly well. I don't know if will always be that good, but now we are looking for a High Point early to middle of the upcoming week. I posted via Twitter my own charts showing the very noticeable negative divergence on the McClellan Oscillator charts for both NYSE and the NASDAQ. The McClellan Summation Index also has been rolling over. Which is concerning for the intermediate to longer-term. The volatility index dropped smartly, and it may be showing a potential profit-taking (or cell) time. Monday or Tuesday, possibly as late as Wednesday.

If it were just the VIX, that wouldn't be enough to call a top. It's the negative divergence that plays into this as well. Frankly, sentiment indicators are mixed. So it's also worth looking at other methods. One of those is Elliott Wave analysis, so be sure to review Tony Caldaro's weekend update | the ELLIOTT WAVE lives on, at Tony's update this weekend discusses why the stock market needs to start moving more smoothly upward, and not in more choppiness, in order to look bullish. He also talks about the importance of SPX 1355. He's made the great observation that on Thursday, the SPX tested 1355 as a 61.8% retracement to the prior week's low.

Mike Burke has produced his usual solid technical analysis report for the stock market, Technical Market Report for August 4, 2012 | Mike Burk |, at This weekend, he's looking at the breadth indicators so you can see what he finds concerning, but also pointing out that seasonality favors a continued move to push higher in the upcoming week. Of course, read his report at this link to see the details and his conclusions.

The guys at "Change In Trend" are delighted about having nailed the low last week, so you'll want to see what they're saying about the potential for a high point around August 9, at The Drop Zone | Change-In-Trend:

The technicians at MIG Bank publish fairly often at Safe Haven their analysis updates of currencies, gold and silver. In their latest at suggest that the euro is running right into resistance at slightly above 1.24 ($XEU, EUR/USD). If that's right, then the concomitant strength in the US dollar may provide a headwind for stocks, supporting the idea that stocks may stall out at resistance in the next few days.

Raymond Merriman had pointed out that August 2 would be an important date, and also that the time around August 8 will be one to watch next. In this weekend's preview column, he discusses in more detail what we should look out for this week as well as the rest of this month (even including the President's birthday August 4). Check it out at,-2012/.

For the bigger perspective, Droke has written an article at about the interaction of the Fed and central banks' decisions on liquidity, and the long-wave cycles. He doesn't seem to indicate whether he believes the market will move to new all-time highs, but he does seem to think that after early 2013 the dominant pressure is downward.

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