april 18, 2011

Stockmarket Cycles update for Monday, April 18, 2011
 
We remain bullish in our outlook despite today's sharp decline. There are several reasons for retaining our bullish outlook and one of them relates to the updated chart we are attaching to today's update. It is a chart of the daily advance decline line of the New York Stock Exchange which we showed you last week. We pointed out that prices have come down towards an exponential 50 day moving average and also close to a lower parallel channel line on the advance decline line. Notice in the updated chart that the advance decline line moved even closer to these indicators although there is still a little room left on the downside. 
 
A decisive break of the channel and the exponential 50 day moving average would then become a negative for the stock market, at least for the short term, but as of today we consider the decline to be simply much apparent "sound and fury signifying nothing." Let's give you some reasons for that judgment.
 
The 10 day moving average of the closing tick figure on the New York Stock Exchange closed at a reading of -130 today, the lowest most oversold reading of the year. The last time the reading was this low or lower was on December 31, 2010 at the beginning of a big rally.
 
Nominal five week closing price projections were generated today and in two of the three cases were met by today's close. Here are the projections:
 
S&P 500 Composite Index                         1294.00-1303.80            closed today at 1305.14
DJIA                                                                    12,080-12,254                closed today at 12,201.59 
New York Composite Index                    8145-8291                      closed today at 8277.11
 
The S&P 500 missed the upper window of its closing price projection by less than 1.5 points. The other two indicators closed within their projection windows.
 
The McClellan Oscillator closed today at -145.5 with the McClellan Summation Index at +2540.0. The ratio adjusted McClellan Oscillator closed at -47.7 with its Summation Index at +508.9. The CI/NCI ratio closed at 1.063 with the S&P ratio at 1.049. Here are today's trading index moving averages:
 
Single-Day    2.31
10 day              1.11
Open 10           1.00
New 10             1.18
Open 30           1.06
TRIN 5              6.64
 
The S&P 500 New 10 TRIN closed at 1.17 with the New 20 at 0.82.
One of our subscribers e-mailed us this afternoon talking about the huge volume in Citicorp (C) and how it drastically affected TRIN readings today as it moved above and below a zero gain for the day. Indeed, those moves were dramatic and we have noted often over the past few years that we have less trust over the efficacy of the TRIN readings but we do not agree that it means they should be ignored altogether.
 
Mutual fund switchers—both Rydex and Fidelity switchers are in 100% cash positions. All mutual-fund switchers should call the telephone update each market day after 3:20 PM Eastern time but before 3:40 PM and also each market evening.
 
There are no new projections for the gold complex or the bonds. Have a great day! We will talk to you tomorrow.