Saturday, 29 September 2012

Weekend update'2 - monthly index cycles

September saw the broader market climb a further 2-3%. The anomaly was the 'old leader', the transports slipped a little over 2% lower, closing below the big 5000 level.

Lets take a grand overview of the six main US indexes...

IWM (representing the Rus'2000 small cap)

A brief spike to new all time highs for the Rus'2000 small cap.. truly incredible. However, we have some real messy divergences on the underlying MACD (blue bar histogram) cycle. It is very difficult to make any assertions about what remains the most volatile index.

The doomer bears should be seeking a break of the big 80.0 on IWM, and an eventual monthly close <70. Right now, the latter seems extraordinarily unlikely any time soon.

Nasdaq Comp

The tech' sector is largely continuing its relentless climb. The big 3000 level is now a key support level, and it sure won't be easy to get a monthly close under it. So long as AAPL can post 'in-line' earnings this October, the Nasdaq should be able to comfortably hold over 3k.


The break to new post 2009 highs, is clearly yet more pain for the bears. Just getting a close below the monthly 10MA of 13k is going to be a real tough task for the bears in October.

Bears really need a break under Dow 12500, until then, the trend remains very much upward. The 'crash' floor would be a very natural 11000, which is around 17% lower from current levels.


The master index - despite a mid-September surge higher, is still failing to break the May'2011 highs. This should still be one concern for the bull maniacs out there. Yet, only with a break below 7500 could the bears get justifiably excited about a major trend change.


The announcement of QE3 sent the SP' briefly spiking to 1474, but after two trading weeks, the bulls are so far unable to break higher. There is huge support though at the recent cycle low of 1397, and even if that failed, there is massive support around the 1350/1300 zone.

The 'doomer crash floor' would be a very natural 1200/1150. Such lowly levels seem very distant though, and it will take some major market upset just to break back into the lower 1300s.


For the first time since Dec'2011, the transports closed the month <5000. That is now a confirmed red warning flag in my opinion. In a way, it is very logical for the first index warning to come from the 'old leader'.

Next downside target for the tranny is in the 4500/4300 zone. That is a good 10% or so lower, and might equate to the sp'500 @ 1350 - which as noted earlier, is a key support zone.


With September being yet another upward month, the bears are without question still fighting against a steam train. However, of the six indexes I regularly cover, we do have one train carriage that has broken away, and is now slipping lower. The transports is warning of underlying macro-economic trouble. Whether you hold to a primarily bullish or bearish outlook, the weakness in the transports index is not to be dismissed lightly.

Clearly, the primary trend for the broader market remains UP.

The bears should look for further declines in the transports this October, with a lower low, and they should also look for weakness to start appearing in at least a few of the other indexes. 

Back on Monday :)