GLOBAL MARKETS ARE MOSTLY LOWER IN DECEMBER -- PERCENTAGE OF STOCKS ABOVE THE 50 DMA CONTINUE TO DETERIORATE -- $COMPQ IS STILL OUTPERFORMING -- UTILITIES AND ENERGY SECTORS UNDERPERFORM -- $USD APPEARS CORRECTIVE
** GLOBAL MARKETS ARE MOSTLY LOWER IN DECEMBER **... Chart 1 shows the price moves of the major global markets since the close of November. The $BSE ( Bombay, India) has moved higher. The $FTSE (London) and $CAC (France) markets are continuing to go lower. Germany is still strong as it is up 1.5% this month and has performed better than the $SPX over the last 3 months. So far, the Santa Claus rally appears to be stuck at the North Pole.
(click to view a live version of this chart)
Chart 1
** THE PERCENTAGE OF STOCKS ABOVE THE 50 DAY MOVING AVERAGE CONTINUES TO DETERIORATE.** ... Chart 2 shows how the market trends when we have high levels. The market is currently sitting just above the levels of where we historically see larger downside moves. The important levels are 50% for the 50 DMA and 60% for the 200 DMA. Currently we are just above on the 50 DMA. You can see that 10% of the stocks fell below the 50 DMA yesterday. The percentage of stocks above the 200 DMA has been trending down for 6 months, but is still well above the 60% level. However, this can be a fine line and you can see in the past, once it starts breaking down, it can be a quick thrust.
(click to view a live version of this chart)
Chart 2
**THE $COMPQ IS STILL OUTPERFORMING THE OTHER INDEXES OVER THE PAST 3 MONTHS.** ... Chart 3 shows the $COMPQ having the strongest gains in the indexes over the last 3 months. The $RUT has pulled back off the highs the fastest. The $RUT has lost 4% since the end of November. The Dow Industrials are making 4 week lows, which seems to track the recent behavior of the $FTSE and the $CAC. As the Dow Industrials are making 4-week lows before the other indexes, we might be seeing the start of some rotation out of the Dow Stocks.
(click to view a live version of this chart)
Chart 3
**THE UTILITIES AND ENERGY SECTORS UNDERPERFORM**.... The Sector ETFs reverted to the mean about 2 months ago. When looking at the 3-month sector picture in Chart 4, an interesting pattern formed on the PerfChart. You can see just around the October 9th low, all the sectors reverted back to unchanged from the previous month. The weak sectors improved and the strong sectors pulled back. This created a bowtie knot based on the start date of Sept 11, which just happens to be three months back from today. Since then, energy and utilities have been the worst performers. Financials have underperformed for the 3 months, along with material sector stocks. Cyclical, Technology and Industrial stocks have all gained about 1 or 2 % more than the $SPX. One sector that seems to be perking up is Consumer Staples. This could just be Santa related, or an early hint that something is changing. The three strongest groups are the early stage leadership groups, which we associate with growth and have consistently held up after surging off the October 9 lows. The utilities have taken the biggest dive, probably related to bond prices. Chart 5 is the same information displayed in Histogram mode.
(click to view a live version of this chart)
Chart 4
(click to view a live version of this chart)
Chart 5
**THE USD APPEARS CORRECTIVE BUT THAT CAN DRAG ON.** ... Chart 6 shows the UUP to view the $USD intraday. Elliott Wave counters look for impulsive waves and corrective waves. Impulsive waves are considered the major trend while the overlapping waves are considered mean reversion within the trend. There are two major technical points on the UUP chart that are making this technical opinion more difficult. The first is the fan lines would suggest that the large pullback in UUP is corrective as it is broadening which would imply an upside breakout. Good but the corrective move has lasted for an extremely long time. The second clue would be the impulsive waves have been strong but brief, as they only last for a few weeks. The corrective overlapping waves have been short little candles but continuing for months. So the wave structure is not that helpful here so far. We would normally expect the primary impulsive waves to make up the main directional move.
(click to view a live version of this chart)
Chart 6
**$CRB CLIMBS OFF THE BASE IT BUILT IN NOVEMBER.**... The $CRB spent the month of November basing and has perked up substantially as shown in Chart 7. With the $SSEC exchange holding above the 200 DMA for more than a month now, this could be a change in direction for the commodity sectors. The other large developing economy is India and the $BSE is trying to breakout to new highs.
(click to view a live version of this chart)
Chart 7
** GOLD SPIKED HIGHER ON TUESDAY AND DIVED THIS MORNING.** ... The moving averages continue to point to a strong downtrend in gold as the 50 DMA is well separated from the 200 DMA. Aggressive traders are looking for support at the June low levels of 115-117.5 on GLD. There was only one close below that, then a sharp reversal. Chart 8 shows the 115 level where GLD found support in late June, coinciding with the lows on the $SPX the same week. Now GLD is down testing this support area while the $SPX is near all time highs. The testing of 117.5 throughout the first week of December gave investors some hope that new lows would not be made. After gapping above the down trend line, GLD has now reversed. GLD gapped back below the trend line this morning. So far the move down has been of the same slope and magnitude as the August to October pullback.
(click to view a live version of this chart)
Chart 8
Continuing with Chart 8 above, GLD moved lower as the US market moved lower in the May 20/June 24 period as well as the Sept 18/ Oct 9 pull back. GLD rallied higher from August 1 to the August 26th market low and then reversed. The Red/Green arrows marked where GLD and the $SPX moved in the same direction. The orange arrows mark paradoxical (opposite) inflection points where the $SPX turned higher as GLD turned lower. So the relationship between GLD and the $SPX is hardly straightforward. The inflection points are almost identical in the same direction at the red/ green arrows, but the orange arrows mark opposite reactions. The fact that both GLD and the $SPX had big moves to the downside yesterday would appear to suggest a red arrow where they both move down together. The next few days should confirm or deny if this is a new trend.
