Stockmarket Cycles update for Friday, July 13th

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A strong positive breadth day today could have seen both the New York Stock Exchange and the S&P 500 advance/decline lines moving to new highs and confirming the new highs in the indexes. It was not in the cards and the poor relative performance of the breadth figures over the past two days in relation to the very strong moves in the averages casts a negative light on the new all-time highs reached by a majority of the major indexes. The confirmation was within reach but just did not happen.

But something did happen today that also happened at important market tops registered on February 9th, 1966, January 11th, 1973, December 1st, 1980 (S&P 500), and July 7, 1990. In fact, the last time these coincident factors occurred was 2-3 weeks before the January 14th, 2000 previous all-time high on the Dow Jones Industrial Average. What exactly is it that happened on those occasions and again today. The Dow and/or the S&P 500 went to a new all-time high with the ratio adjusted McClellan Oscillator below 19 and the ratio adjusted McClellan Summation index below 245. Market tops of importance usually take time to form and one of the things that tends to occur is a sequence of higher prices with lower momentum readings. That is exactly what we have seen recently.

By the way, the all-time high for the New York Composite Index in the year 2000 was registered on September 1st and the same coincident factors mentioned above occurred on that date, namely the ratio adjusted McClellan Oscillator was below 19 with a reading of + 6.1, and the ratio adjusted Summation index was below 245 with a reading of + 221.5. Pretty interesting, no?

We do know we are in a time zone for a potentially important market top in a year ending in 7 within the decennial pattern. On average that top does not occur until the first few trading days in August, but over the past 110 years several of them have occurred in June and July. The technical readings tell us to be prepared for a top right here and right now even though they allow for another several weeks of dwindling momentum and slightly higher prices such as the pattern that occurred between late December 1999, the last time these coincident factors occurred prior to today, and the final price high on January 14th, 2000.

We also know that virtually all the upside price projections have been reached on at least a minimal basis. The Dow Jones Industrial Average and the New York Composite Index moved within the windows we noted on yesterday's update as possible alternate projections. The S&P 500 missed by around 10 points. Be aware, however, that the S&P 500 finally exceeded its prior all-time intraday high registered on March 24th, 2000. It is but one more reason to be looking for potentially formidable resistance at these levels. Perhaps not one investor in 100 would be able to tell us that the S&P 500 finally reached an intraday high level which it has been struggling to regain for almost 7 1/2 years. The best kinds of true resistance levels, believe it or not, are those that the average investor is unaware of.

The McClellan Oscillator closed today at + 62.3 with the McClellan Summation index at + 1,786.3. The ratio adjusted McClellan Oscillator closed at + 18.9 with its Summation index at + 243.3. The CI/NCI ratio closed at 1.068 with the S&P 500 CI/NCI ratio at 1.050. Here are today's Trading Index moving averages:

Single-day 0.71

10 day 0.93

Open 10 0.90

New 10 0.77

Open 30 0.97

Trin 5 4.76

Mutual-fund switchers— Rydex switchers— the S&P cash did not get above the required number before the required time today so no position was taken. You remain in 100% cash positions. Fidelity Select switchers are in the Fidelity Select Gold fund. All mutual-fund switchers should call the telephone update each market day after 3:20 p.m. Eastern time and each market evening.

Stock-index futures traders— you exited your September S&P long positions at 1,562.50 for a profit of 25.80 on the trade. We will be looking for a short trade next week but we believe prices will continue to bounce around this old resistance level for at least another day or two. There are no recommendations for Monday.

On the weekly projection charts, Fidelity Select Gold gave an upside projection to 37.65 ± 4.70 and, if reached, that could lead to higher projections. Bonds just barely gave a nominal 10 week upside projection to 108 31/32 ± 13/32 but is not a high confidence projection because the projection line was barely crossed. Have a great weekend. We will talk to you on Monday.