Technical Watch Cumulative Charts

Cumulative Data
Week Ending 6/18/04

"With past history showing an average 1 1/2% positive price performance after the burial of past president's (source: Ned Davis research), let's go for a positive Monday and then maybe into Tuesday - some consolidation or softness of the pattern on Wednesday into Thursday - with Friday a "toss up" dependent on what we've accomplished going into the end of the week - but where the start of a pullback wouldn't at all be surprising."

With the exception of Monday's over 1% decline (instead of an advance), the past week's price movement turned out to be pretty much what was expected using the cumulative data strictly as a guide to make such forecasts.

Beginning this week, Technical Watch will be changing the format of the analysis being provided here by not only zooming in on the cumulative data that has been presented previously, but also now included will be the NYSE and NASDAQ breadth McClellan Summation Index - with a price pattern overlay of these same indices. Also being added will be the cumulative TICK and TICKQ for a more balanced view of the day to day movements of market activity...all of which should present a better way to provide greater clarification of the analysis being provided by the author - but more importantly - to help you, the reader, to better understand the possible utilization of such analysis, in conjunction with your own strategies, for more profitable trading successes.

The NYSE cumulative advance/decline volume data continues to support a bullish configuration having bounced off the 20 day EMA last week, and near term bottoms above bottoms now control the pattern. More importantly, last week's action now has NYSE volume leading NYSE breadth to the upside for the first time since the May price bottom, and though a bullish crossover of this same 10% "trend" line mentioned above has yet to occur to generate a buy signal, it's now a day or two away from doing so.

The NYSE cumulative advance/decline breadth data found strong support with last Monday's decline at the intersection of where the 10% and 5% trends met, and then moved higher for the rest of the week. The key item of note is the trend divergence that was generated with this same decline with the A/D volume data shown previously. This has now put the breadth data in a solid bullish configuration with regards to volume - no less on a classic "get set" buy signal on it's own merit with the 20 day EMA leading the 40 day EMA which is leading the 200 day EMA.

Below the breadth data is the NYSE McClellan Summation Index - which is on a buy signal of it's own - and where last week's action has shown a slowing of the fuel needed for prices to move above overhead price resistance. What you will also notice within this current close postings is that this is occurring within the area where the final purging move began with the large seperation of postings to the downside in the beginning of April, and this can be utilized in the same way as the declining tops line on the price chart suggests. More importantly, the Summation Index is now in the vicinity of the April highs that occurred directly before the actual purging process took place that led to the May price bottom. It will be very important for the Summation Index to take out these same April highs if there is any chance that new recovery price highs will be seen during this current price advance, and where failure to do just that could be very bearish for the intermediate term of market action.

The cumulative TICK continues to show money flowing freely into this particular marketplace which suggests good things for this exchange overall.The cumulative new highs/new lows continues to be on a technical buy signal, but still not in the clear until the 10% trend moves above the 5% trend. However, using the TICK data as a guide, this crossover could occur as soon as next week - and would probably occur in conjunction with the A/D charts making new recovery highs within this present advancing structure.

Bottom Line: The New York Exchange continues to show a bullish money flow bias where any decent follow through by mid week would be all that would be needed for a strong buy signal to be generated.

The NASDAQ cumulative advance/decline volume generated a buy signal last week, and near term bottoms above bottoms are now controlling the pattern. More importantly here is that the data has now been contained by the 5% trend (40 day EMA) three times over the last two weeks which is usually a sign of a "launching pad" structure for this data to move significantly higher, and not what one would consider a "head and shoulders" pattern...though until we take out the previous high water mark seen earlier this month, this too can not be discounted at this stage - as any move back below these same EMA's would suggest a test of the May lows as a minimal expectation.

The NASDAQ cumulative advance/decline breadth remains the ugly sister among this set of data charts continuing to have trouble in making any real progress over the last month. The only good out of this one is that NASDAQ volume is remaining much more buoyant to that of the breadth, so in this area we remain constructive - but because of the way this data is struggling, it keeps this exchange on a high cautionary alert for a possible failure.

This weakness can be seen with the McClellan Summation Index and it's present negative position. As with the NYSE MCSUM, moving up to and then above the April highs will be very important as to the longevity of the present advance from the May lows - and where a break above the declining tops line shown on the price index would be very suspect unless these same Summation Index highs are also taken out in quick order. If not, a Summation "failure" would then be the result and where a significant price decline in this same market index would likely be the direct result.

The cumulative TICKQ continues to support good money flow and has now found key support at the important 40 day EMA (5% trend) which has kept this exchange from selling off more dramatically than it actually has since the January highs. The cumulative new highs/new lows continues to support the buy signal that was generated three weeks ago, and along with the TICKQ, continues to support the idea that any near term surprises for the price pattern will more than likely be to the upside.

Bottom Line: Though the NASDAQ Exchange continues to support an intermediate term bullish price structure, the advance/decline breadth data is keeping this market from finding the same kind of price support as there has been with the NYSE group of stocks over the last two weeks. This suggests that any further price advance from this juncture will more than likely be "pulled up" by what the big board might do near term, and conversely, this market is in a better position to lead the rest of the market to the downside if something disappointing occurs - and where large percentage price moves in this direction are likely to occur.

Weighted with many energy and precious metals stocks, the American Exchange is showing good character at this juncture suggesting that a rally in either one (or both) of these two sectors may not be far behind. As with the NYSE, we not only have cumulative volume leading the way up, but we also generated trend divergence between volume and breadth last week. And though there's still some work to do going by the positions of the EMA's, this market is one to watch over the next week or so for additional bullish confirmations.

Conclusions: With the notable exception of the NASDAQ breadth, the rest of the cumulative data continues to reflect a marketplace with a high amount of liquidity. The strongest flow of money is going into the NYSE, followed by the AMEX, with the NASDAQ a distant third. Daily raw volume continues to be a concern as it directly effects the current price patterns, but what volume is being traded is coming in on the buy side. The McClellan Oscillator for breadth and volume have been generating small point changes for the last three days suggesting a marketplace of total indecision, as if it's waiting for something to happen to gain additional clarity of direction. Many index price charts have been reflecting this indecision by trading in triangular or horizontal trading patterns. Quadruple witching produced above average volume (in fact it was slightly higher than that of the March expiration) while the major indices closed higher for the day.

So based on all of this information, let's again give the nod to the bulls, and look for a higher Monday, and if the tone is solid, a continuation into Tuesday and Wednesday, where Thursday and Friday could provide our next breather before we go into the following week's Fed statement on Wednesday the 30th - and where keeping an eye on the NASDAQ advance/decline breadth ratio might not be a bad idea.

The above charts are courtesy of StockCharts.com

Comments provided are for informational purposes only
and not intended for trading purposes.

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