A Little Bit of Something for Everyone

We have finished writing the Year Ahead report. However, we still have to add the charts and put it through a final proofread. We expect to release the report to subscribers by Tuesday, or Wednesday at the latest. Anyone interested in either becoming a subscriber or separately purchasing the Year Ahead issue should contact customerservice@wminsights.com.

The S&P 500 began 2010 on a solid note with a rally of 1.6%. Both breadth and up/down volume ratios were positive by better than 6:1; this was the best performance for each since mid November. Total volume, which was almost double Friday’s total, seems to have come out of its holiday malaise; nonetheless, it is still below its 21-dma. The daily Coppock Curve has a bullish bias for 15 of the 24 S&P industry groups.

Volume Flow
Monday’s rally carried both the S&P 500 and S&P 600 (small cap) indexes to new recovery highs on both an intra-day and closing basis, and various a-d lines are either currently, or were very recently, at new recovery highs. However, only two of the 24 S&P industry groups finished at a new closing high. Moreover, the Bullish Percentage Indexes for the S&P 500, 400, and 600 are all below the previous recovery high (although all have moved above their respective 10-day moving averages). And to top it off, our measure of volume flow is well below its August peak (and its December peak for that matter).

So there is a little bit of something for everyone. Bulls can point to breakouts, while bears can point to a myriad of divergences.

For our part, we continue to give the post-November uptrend the benefit of the doubt. At the most basic level, the trend is engaged in a series of higher highs and higher lows. Moreover the November-December trading range is best counted as an Elliott Wave triangle, which is a continuation pattern. Thus, despite the divergences, we have to go with the idea that the trend will remain intact until it gives us a sign that fatigue – and a potential reversal – is at hand. At this point, it will likely take a break of 1086-1085 to end that series of higher lows and could be an initial sign of a reversal. There is intervening support at 1094-1093.

As for resistance, the “500” is currently in the 1121-1156 range that we have been highlighting for some weeks. Within the range, resistance is indicated near 1137. A breakout through 1156 would allow for further strength toward 1170 and perhaps 1200+.