Technical Watch Cumulative Charts

Cumulative Data
Week Ending 6/04/04

"With the key unemployment report coming out next Friday of this shortened trading week, let's go for a firm Tuesday, a more pronounced rest to digest the previous gains made on Wednesday into Thursday, all in preparation for what should be perceived as good news for the market no matter what the numbers show this coming Friday."

Pretty much in line with expectations, though the rally produced after the unemployment data did lack true conviction (volume) which later produced the soft close on Friday - though the plurality of breadth for the market overall was very good with a 2:1 ratio.

As far as the cumulative charts are concerned, we remain in constructive formations overall, with Wednesday's and Thursday's digestion days accomplishing the pause that was necessary after such a powerful injection of liquidity that came the week before. The market was also able to turn the bullish sentiment tide as well, especially with Thursday's decline, and near term volume indicators have relieved much of their overbought conditions that again came from the last week of May's strong and swift advance/decline reversal.

As you will notice this week, the NASDAQ cumulative New Highs/New Lows chart is now back in a bullish configuration with the data line back above it's shorter term exponential moving averages, with these same "trend" lines in a constructive formation with the 10% leading the 5% which is leading the 1%. This now gives a technical buy signal for this market, though having the A/D data join the NH/HL chart in this same configuration would then give the necessary "all clear" for prices to move importantly higher overall.

The 10% and 5% index' of the McClellan Oscillator were also able to pull back to their respective zero lines during the week, and remain in bullish crossover configurations. At the same time, the NYSE breadth and volume McClellan Summation Index' are now in close proximity to their zero lines. This would suggest that on an intermediate term basis we again have equal balance between the bulls and bears, and with the price patterns showing this same equal balance, whoever takes "control" from this juncture should be able to maintain price direction for the next couple of weeks. It is in this area in which the McClellan Oscillator is suggesting that this control will more than likely remain on the buy side, so this should be the near term expectation for next week.

Another area that should help any positive market bias comes with the crude oil market which now appears to have put in a short term top after getting the remaining "unwilling" buyers into this market last Monday on the back of the Saudi oil attack last weekend. Unfortunately for these same late traders, when the actual news that reserves were "higher than expected" (which was no real big surprise as when the fuel of an economy gets too expensive in the first place, the first thing that this same economy will do would be to cut back the usage on this same product), and then the OPEC meeting resulting in adding 2 million barrels a day to their production quota (which was actually disappointing, everything being considered), this promptly subtracted $4.00 a barrel in the premium value of this same commodity in less than 4 days. Currently, the daily continuation chart closed below the 50 day EMA on Friday, but the technicals have continued to deteriorate to where a test of the 200 day EMA - at the $35 level - should be the next technical expectation in the next couple of weeks or so. In any event, this is one area in which the equity markets should now breath a sigh of relief near term, and this should help in increasing capital flow into the markets overall.

So, the bottom line for this week is that last week's action has continued to maintain a bullish bias where it is only the lack of conviction that is holding the price pattern back from advancing with any kind of importance. A potential problem for the near term will be how the markets will react with the passing of former President Reagan, and if anything might happen because of this when the body is flown back to Washington for the State Funeral...and where many world leaders will be present during this time to pay their respects. Prior to the current geopolitical terrorism climate, past Presidential deaths have resulted in muted to soft market action until these men have been laid to rest - and 1 day stock exchange closures have also been the result of such occurrences. However, with the way the worldwide media is handling this story in how they are remembering what he did and how he did it, this could bring both the bears and bulls together to provide the necessary spark that continues to be missed on the conviction side of the equation - and where this kind of event might be all that would be needed to break the current price pattern out to the upside with any type of importance.

Considering all that we have to deal with then, let's go for a neutral to soft market for Monday, Tuesday, and maybe into Wednesday (if open), and once things "settle down", a better attempt to rally on Thursday and into Friday where volume will be the key to whether we can finally follow through from what the end of May's initial breadth of market impulse suggests. Conversely, if we can't move though the zero line on the Summation Index next week, this could provide a "Summation Failure", and a retest of the price lows made at the end of May will probably be the near term result because of this.

The above charts are courtesy of StockCharts.com

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