Divergences to the Left of Us, Divergences to the Right of Us, But …

Our website (www.wminsights.com) has been launched. Despite our best efforts, it is not quite ready to accept subscriptions so it is not yet interactive. It has been visited by hundreds in the past three trading days; if you haven’t done so, we urge you to explore and see what the site (and we) will offer. We also encourage feedback; let us know what you like and don’t like. Before long much (though not all) of the site will be available only to subscribers. If, after viewing the site, you are interested in becoming a “charter subscriber,” or would like more information, please send an e-mail to WMGALLC@gmail.com.

On Tuesday, the S&P fell by less than 0.01%. Still, this was sufficient to break a six-day winning streak. Breadth was negative by 8:5 and up/down volume was negative by a 7:5 margin. Total volume fell 3% and is still-below its 21-dma. The daily Coppock Curve now has a bullish bias for all 24 S&P industry groups.

There are more near divergence than we can shake a stick at. For example, while the DJIA is currently at new recovery highs, it is the only major index in that position. Similarly, NYSE common stock breadth is below its October highs, the number of stocks making new 52-week highs is below its ytd peak, the Bullish Percentage Index for the broad-based S&P 1500 has broken down, and the S&P 500 is below it recently violated post-March uptrend. And, for what it is worth, over half of the S&P 500 components are more than 5% below the respective 2009 highs even though the index came within half of one percent of its own high yesterday.

S&P 500 Hourly

In addition to all of this (and more) non-Elliott Wave evidence, we view the wave structure of the current rally as being corrective in form. So, based on all of this, we believe that this rally should prove to be more of an ending than a beginning.

Nonetheless, we need to respect the potential for higher highs. If so, that would mean that the 10/21-11/3 five-wave decline will be counted as the “C” wave of a larger ABC correction. Thus, if the current rally continues on its corrective path, it will likely be a diagonal triangle (aka a wedge), which is an ending pattern. That said, the rally should benefit over the short run from an oversold and improving daily Coppock Curve and an oversold 10-day CBOE put/call ratio.

First resistance is 1096-1101, but the potential for higher highs means that we need to continue to keep an eye on 1121-1156 (which encompasses both external Fibonacci relationships relative to the entire 2007-2009 decline and internal wave relationships comparing the post-July rally to the March-June uptrend). Support is at 1070-1060, then 1030-1020.