Technical Watch Cumulative Charts

Cumulative Data
Week Ending 7/02/04

"And when you combine all of this with a historical firm seasonality period going into next weeks holiday weekend, and many of the price indices now in bullish configurations of their own, one would have to again give the nod to the bulls when the trading week is all said and done. However, with everything looking so good, and the Summation Index approaching some key overhead resistance levels, it also might be time for a pullback and/or some near term disappointment creeping into the marketplace...so I'm going to forego any directional forecasts for this week, and let the marketplace itself be the ultimate arbitrator."

Quite an interesting week as it turned out - with the seasonality factor having no real influence on the current price structures - and continued indecision ruling trader's investment commitments.

Though it peaked out at the beginning of the week, the NYSE cumulative A/D volume continues to maintain a bullish configuration, but also has now lost its near term leadership to that of the NYSE cumulative A/D breadth.

NYSE cumulative breadth continues to move higher and is now within 2000 net advancing issues over declining issues of making new all time highs.

The NYSE price/Summation Index chart is now at an interesting juncture. While last weeks action has now taken the Summation readings above the important April highs, price has lagged the corresponding levels in which were seen at that time as marked in yellow on the chart. With the breadth McClellan Summation Index itself at levels in which "overbought" readings are generally acknowledged at the +500 level, along with the divergence noted on the chart, the expectation of an internal pullback over the next couple of weeks can now be entertained. However, this doesn't necessarily mean that a comparable price pullback will follow since the MCSUM reading on this exchange is as high as it is - and where the price pattern could trace out something more like the recent February/March price topping period. On the other hand, this same hesitation in the Summation may be all but a price pullback to what was overhead resistance prior to the breakout 10 days ago, so any near term resolution to this conflict should be traded accordingly as long as the present raw data of the A/D line continues to be maintained.

Both the cumulative TICK and the new highs/new lows continue to look constructive, so no additional interpretations are warranted here.

Bottom Line: The NYSE continues to be on a buy signal, although a near term regrouping after the work done over the last 6 weeks is now a real possibility.

Like the New York exchange, the NASDAQ cumulative A/D volume chart continues to support a bullish configuration, with the last half of the week taking a near term breather of the work done over the last 2 weeks. Near term support should continue to come at the 20 day EMA (10% trend), with key support coming in at the 40 day EMA (5% trend).

After putting near term bottoms above bottoms, the NASDAQ cumulative A/D breadth chart continues to have problems in mounting any type of conviction to the upside, and settled last Friday back at the 10% trend (20 day EMA). With indecision now controlling the pattern after last week's peak leaving us with a near term top beneath a top to go with the prior week's bottom above a bottom, any directional movement out of this sideways movement should be respected for what it may imply.

The NASDAQ price/Summation Index chart below gives a better representation of the overhead resistance mentioned above on the NYSE market, showing what breadth of market in relation to price is up against (again as highlighted in yellow on the chart), and why a rally failure took place last Thursday. The additional problem with this exchange is that after 6 weeks of moving north from the May bottoms, the NASDAQ breadth MCSUM continues to be under the zero line of neutrality. Here again, history of this tool suggests that a near term rest should be anticipated after a prolonged move in the upward direction, so next week should provide additional clues as to whether the end of last week's retracement is nothing but a pause for price to snapback to or towards the overhead resistance line that was previously controlling the price pattern - or - the start of something more dramatic to correct this same near term problem.

On the bullish side of the equation, both the cumulative TICKQ - and especially the cumulative new highs/new lows chart - are strongly suggesting that any eventual "trending" price move that may result from the advance/decline indecision noted above should be to the upside when all is said and done. Of special note this week, the cumulative new highs/new lows are now at all time highs, which again says good things about this exchange for the intermediate to longer term price pattern.

Bottom Line: The NASDAQ exchange continues to be the weakest of the three exchanges covered in these weekly updates with respect to broad based market breadth, although the relative price strength for this exchange continues to lead that of the NYSE (which is represented by that of the new highs/new lows data). Because of this, any new infusion of capital coming into the market in total should find its way into this exchange first, and any confirmation generated by the cumulative breadth of this idea, should then confirm that an important price advance will be underway for the markets overall.

The American Exchange continues to build on its own constructive patterns over the last two weeks, with the cumulative A/D breadth now generating a "go" buy signal last week, and the cumulative new highs/new lows now knocking on this same door. Keying on the stocks of this exchange which include oil, precious metals, and exchange traded fund related securities would be most advantageous at this time in relation to individual price pattern breakouts of their own in this same direction.

Conclusions: Last weeks overall action resulted in no psychological external resolution to the price patterns traced out over the last month. The FOMC gave the market nothing in the way of surprises with the more than anticipated quarter point rise in the cost of money to be put to work, and with the end of the quarter behind us, the cumulative volume picked up to the downside of those products in which profits were maintained leading up to this event - especially in the NYSE group of stocks. This same selling wave also generated a high ARMS trading index numbers for the total market in which has accompanied many price bottoms in the past - but this also resulted in little in the way of actual price decay - nor any damage to the cumulative charts in general.

With the idea of the 9 month cycle bottom still due to nest in the early part of August, along with the breadth Summation Index of the NYSE previously suggesting that a trading range with an upside bias still to be considered, the month of July could continue to be frustrating to both the bulls and the bears for the better part of the month. And with the continued buoyancy of price itself, it will more than likely continue to be a market of stock picking than that of an overall trending market in either direction on a short term basis (that of a 2 to 4 week duration).

Considering all of what we have to deal with then, let's go for a lower Tuesday and possibly into Wednesday, a pause to look around to see what was accomplished on Thursday, with Friday being the key day, and ending more than likely with a daily higher close - with a higher weekly close a good possibility as well.

The above charts are courtesy of StockCharts.com

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and not intended for trading purposes.

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