Sunday, December 2, 2012
The Bulls Are In Charge
In last week's post, I was somewhat neutral in where I thought the market was heading, with a slight bias upward. Last week's action was very impressive; the market was overbought. Instead of crashing downward, it filled 1 of 2 gaps below and bounced higher. According to $TICK and $NYMO, and some proprietary indicators I follow, the market is still overbought (not a bad thing). It will be interesting to see if the markets dip and rebound, or just continue higher next week. Remember, there is nothing more bullish than a failed bear signal. I think we got a lot of questions answered last week. Based on the McClellan Oscillator and the Ratio Summation Index, the market should see higher highs within the next two weeks to a month. I will extensively go over the Summation Index and explain what needs to happen for the market to continue its uptrend and make higher highs. During the week I posted two charts: Aussie-Yen and Euro-Yen that are highly correlated with the US market, which say the market should be going higher. This seems to be confirming what breadth numbers are saying when interpreting the McClellan Oscillator and Summation Index. I will go over that more in-depth in this post. Finally, I will give two price targets for Apple IF the markets continue to be bullish.
The chart below is the McClellan Oscillator. Last week I discussed how the bounce the market had in May (prior to the market crashing), failed to reach +150 (in others words just a bounce), then fell over. This time around, the McClellan Oscillator was able to make a complex overbought structure (shows strength by the bulls) above 0. The market rarely tops out when this occurs; we should see equal highs or higher highs in the intermediate term (2 weeks to a month). The higher the $NYMO goes above 150, the stronger the message by the bulls.