Technical Watch Cumulative Charts

Cumulative Data
Week Ending 9/3/04

"However, with the Republican Convention now on the front burner in New York next week, and with the high security element involved with this same event, it's probably going to be a very slow trading week going into the Labor Day holiday weekend. Because of this, we're probably not going to gain too much in the way of information that would help in deciding what type of trades would be the most beneficial to ones bottom line. Hopefully after next week though, this blasé attitude will change and will then be able to get back into the swing of things."

With relief, the month of August has now passed with barely a whimper of any news that would be directly detrimental to the marketplace's psyche during one of its more vulnerable stages, and now we move on.

When in the course of analyzing the markets, sometimes it's the little things that can give us valuable clues as to the markets true intentions. This past week is one of those times that provided such clues, and because of this, continued analysis of this data is currently warranted.

However, next weekend begins a series of business trips for the author, so there will not be a written review of these indicators, but these same data charts will again be updated for your review and consideration.

The NYSE cumulative advance/decline volume line has continued to make good progress over the last week by moving above its first hurdle, the 200 day EMA (1% trend). This move has now brought the faster 20 day EMA (10% trend) up to the 40 day EMA (5% trend) in the process. Additionally, this same move has allowed all three of the moving averages to tighten which suggests that an important trending move in this data should be expected in the not too distant future. For the near term though, some resistance should start to set in next week with the 10% trend now up to the 5% trend, and with the work in which the volume line has done on its own by having moved above the longer term 1% "trendline". Taken together then, this would suggest that a pause to the upside progress of this data is warranted and should be expected, and where the converging EMA's should provide additional support to the current uptrend from the August lows on any pullback.

The NYSE cumulative A/D breadth data has continued to make new all time highs, and the pattern itself is in a bullish configuration. Near term, a pullback to the previous tops from last spring should be anticipated and where additional support will lie with the advancing shorter term EMA's shown on the chart.

Thursday of last week provided a breakout point for both breadth and price for the NYSE as the MCSUM/price chart shows below. Price pattern wise, the New York Composite was able to break above the declining tops line from the March price top and this was accompanied by both the NYSE McClellan Oscillator generating a momentum push for the move from the August lows which, in turn, also generated a larger separation of the postings of the McClellan Summation Index right where the previous July highs pushed this same summation pattern lower. This kind of informational "clue" is very bullish behavior for the market for the intermediate term, and this kind of action also just about solidifies the opinion that the lows of August, both for the breadth A/D line and price, will more than likely be the lows for both of these pieces of data for the rest of 2004. However, near term, we are overextended as shown by the MCO, so a pullback to or towards the zero line would now be anticpated to take a well needed rest of the previous constructive work already accomplished over the last month.

Both the cumulative TICK and the cumulative new highs/new lows data continue to move higher with the NHNL now at all time highs reinforcing the current breadth data as it applies to what this exchange's price pattern should do later on.

Bottom Line: The NYSE continues to be the strongest exchange at this time and is leading the total market to the upside. Any daily above average volume that may come over the next two weeks in the direction in which this data reflects should finally give the "all clear" as far as any further price appreciation for this exchange overall.

The NASDAQ cumulative A/D volume line has found initial resistance at the 40 day EMA (5% trend), and is now finding initial support at its 20 day EMA (10% trend). Near term, any breakout from this small data range should be respected for what it suggests.

As with the volume line, the NASDAQ cumulative A/D breadth line has also found initial resistance at the intermediate term 5% "trendline" which has stalled its previous progress. As with the volume line, a break either above the 40 day EMA or below the 20 day EMA should be respected for what it suggests.

The NASDAQ MCSUM/price chart shows that the Summation Index is right up against the overhead resistance line from the January topping period. With the NASDAQ McClellan Oscillator continuing to show an over extended trending move for the A/D line for the better part of the last 3 weeks, it will be more than likely that a move back down to or towards the zero line would be the next technical expectation to relieve this "overbought" condition. Whether this will be a quick event to turn back the Summation Index at its current levels, or whether it will be a slower easing of this same internal momentum to allow the Summation Index to travel to its forecasted goal of the -250 level, will more than likely be determined sometime next week.

The cumulative TICKQ generated a definitive break to the downside on Friday more than likely reflecting the amount of capital that left this exchange based on the earnings update that Intel shared with the market Thursday night. The near term question now is whether this liquidation is a kick off of further price deterioration for this exchange, or that the start of a final purging event to set an important market price bottom in which to rally out of is actually taking place. As a guideline, one would want to see this information moving back to or towards the 20 and 40 day EMA's by the middle part of next week or something else might be going on as it would relate to the current positions of the above A/D data for this exchange - which could then suggest that a continuation of the previous downward price trend before the August bottoms will be reinitiated.

Not much of a change for the NASDAQ cumulative new highs/new lows data which allows for either a bullish or bearish interpretation at this current juncture, so a neutral bias is given here until more information is given.

Bottom Line: The NASDAQ exchange continues to be the weakest, with a fairly important week coming up that will probably set the overall tone of this exchange for the next several months.

The AMEX cumulative A/D volume has not only generated a buy signal this past week, but also currently supports a bullish pattern configuration in relation to this same data, as well as continuing to lead the A/D breadth line to the upside. The AMEX cumulative A/D breadth data is not that far behind the volume as it continues to build a foundation in which prices for this exchange can then rally later on. Everything considered then, the AMEX is showing great potential, but still has a little more work to do before it can be considered in the clear.

Conclusions: With August now out of the way, we now turn our attention to the scheduled time period for the nesting of the 9 month cycle low with regard to price due ideally next Friday, September 10, plus or minus two weeks. Interestingly enough, the three year anniversary of 9/11 comes the following Saturday, and this outside event could create the type of emotional action and reaction in which this cycle bottom mimics...in which stocks rally up from instead of declining into this same price bottoming period. By the looks of things at the present time with the McClellan Oscillator showing over extension of the moves made by the cumulative breadth A/D lines from the August lows, and the lackadaisical movements of the NASDAQ exchange during this same time period, it shouldn't be too surprising if we get some sort of pullback from these current price levels over the next week or two. Action like this would fit nicely with the idea that some sort of an important price bottom could materialize during this same time as the 9 month cycle low would suggest.

However, we also have to remember that the larger 4 year cycle's harmonic 2nd quadrant bottom is also due within the next month as well, so we could be in for a rather bumpy ride for the next two weeks as these two time cycles go about their business of bottoming - with the 9 month actually nesting and then is somewhat held back by what should be a robust upmove out of this same bottom because of the influence of this larger 4 year cycle's personality.

In any event, whatever comes down the pipe over the next couple of weeks, continued due diligence in searching out market sectors that hold up better than the others during any ensuing general price decline should be noted in anticipation for this future overall price bottom whenever or wherever it may actually occur.

The above charts are courtesy of StockCharts.com

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