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Market Breadth: With this past week’s market decline, our Bull/Bear Point and Figure Ratio at 0.75 fell from 1.74 last week, declining into bearish territory. The total count of securities in bullish or bearish patterns increased fractionally to 3554. The count of bearish stocks increased 57%, while the count of stocks in bullish patterns decreased 32%. The Sand 2 Pirls P&F Market Breadth Summary Chart shows us a market now one week in bearish territory. Paid subscribers have access to the OpenOffice Calc data from which the chart is generated.
|The well known market breadth indicator, the NASDAQ McClellan Summation Index (NASI) fell 208 points for the ninth decline in 16 weeks. At a positive 238.39 points, it has fallen below the December 2016, February 2017, May 2016, and July 2017 highs and below the three remaining tops in the last 30 months, and it continues above all four bottoms below -100 in the last 30 months.|
Volume Analysis: In this week’s volume analysis, the NASDAQ Composite Index ended in Distribution mode with average daily volume higher than the prior week. In the last two weeks the NASDAQ had four (4) Accumulation days and four (4) Distribution days. (Accumulation days are counted when the index closes up on higher volume than the prior day while Distribution days occur when the index closes down on volume higher than the prior market day.) Last week, the NASDAQ ended in Accumulation mode on higher average daily volume.
|Momentum: The CCI(20) daily in a Woodie’s Up trend is now at -21.86 (one day below zero), down from +126.39 last week. At Friday 12/29 close, the CCI(20) daily was within the +/- 50 range presenting a ZLR (Zero Line Reject) pivot and Long entry signal at Tuesday 1/2 close. At Tuesday 1/30 close the CCI(20) fell below +100, signaling the end of our trade. The result of this trade simulation was a gain of 426.18 points on the NASDAQ or $11.01 per share of QQQ.|
|In Woodie’s CCI trading system, six consecutive bars above or below zero are required for a change of trend. The Weekly CCI(20) of the NASDAQ Composite Index began a Woodie’s up trend ninety-two weeks ago, while the Daily CCI(20) began a Woodie’s up trend twenty-two weeks ago.|
|The CCI(20) weekly at +137.18, is down from +193.44 last week after forming a ZLR (Zero Line Reject) Long entry signal for Tuesday 9/5 open. Our rule is to stay in the trade until the CCI(20) drops below +100. We will continue to follow the result of this trade simulation in next week’s commentary.|
|Industry Rotation the last two weeks: Two of the top five industries are positive and all of the bottom five are negative. Summary: S&P Retail, and KBW Bank on top; Oil Services, Oil, and Gold & Silver on the bottom. Bullish: S&P Retail continues in the top five. KBW Bank has entered the top five. Oil Services continues in the bottom five. Oil has entered the bottom five. Brokers and Networkers have left the bottom five. Gold & Silver has entered the bottom five. Bearish: Computer Hardware, Disk Drives and Semis PHLX has left the top five.|
|Focus this week: From www.realinvestmentadvice.com “Market Stumble Or Something More?- 02-02-18” by Lance Roberts | Feb, 3, 2018.
The following are some key points and charts.
Well, this past week, the market tripped “over its own feet” after prices had created a massive extension above the 50-dma as shown below. As I have previously warned, since that extension was so large, a correction just back to the moving average at this point will require nearly a -6% decline.
I have also repeatedly written over the last year:
The question now, of course, is do you “buy the dip” or “run for the hills?”
Don’t do either one, yet.
Yes, corrections do not “feel” good. But they are part of a “healthy” market cycle. In more normal, healthy, bullish trends corrections should be used as buying opportunities to increase exposure to equity risk in portfolios.
However, the recent parabolic acceleration in the markets heading into the New Year was neither normal or healthy. Much of it had to do with the massive liquidity injection by the Federal Reserve at the end of 2017 as shown below.
Why is this important?
–Donald Pirl www.s2pmarketsignal.com
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