Warning!

Market behaviour after breadth thrusts as evidenced by the Zweig breadth thrust rules and NYMO spikes to around 90+. This is also supplemented by the % stocks in NYA and SPX above there 200ma (shout out to rotort for adding this component).


After the fantastic breadth thrust off the March 2009 lows from incredibly OS levels, we rallied wildly for over a year and then we got a correction from April to July 1 2010. We then got a Zweig breadth thrust in July 2010 along with a NYMO spike as part of an INITIATION THRUST kicking off a new IT rally. Note it originated after deeply negative internal lows on Zweig of 0.3 and NYMO -136 as well as from oversold external lows levels for the %200 of less than or equal to 30%.

KEY IS THAT the price high after the breadth thrust came 1-2 weeks after the peak of the breadth thrust (red down arrow). Another important point here is that after this initiation rally, there was a greater than 61.8% retrace before the IT rally took hold. In fact, NYMO got back down to -67 and Zweig to 0.4. Then came the robust rally.

Then after the top in May 1st 2011, the first correction down was bought with another breadth thrust, but rather than an initiation thrust, I call it a reactive thrust after the first move down from an IT top. The psychology of buying the dip is evident here after a long bull run courtesy of QE. The difference here is the divergence of the %200 with the retest of the price top after that reactive thrust.

Note again that there is a secondary price top 1-2wks after the internals top (red down arrow) which marks the best shorting opportunity before the major correction ensues. This led to a greater than 61.8% retrace of the whole enchilada rally off the July 2010 lows. We also got a reset NYMO flag at -142 and Zweig got down to .26! as part of the internal lows along with fully OS %200 readings.

That led to a new INITIATION THRUST in Oct 2011. Again the secondary price high was 1-2wks later in early Nov 2011 (red down arrow) marking a shorting opportunity. We again got a greater than 61.8% retrace of the initiation rally down to the Thanksgiving lows. This again took NYMO down to -106 and Zwieg to 0.33 and the %200 to the 20% range. It was then that the ensuing long bull run took effect courtesy of more QE.

This has now lead to the recent top April 2012 and the first correction down into the June lows. Off those lows, we got what I again refer to as a REACTIVE THRUST after the first drop off the highs. NYMO peaked at +100 early July and again, about 1-2wks later we get the secondary price high on Thursday July 19th (red down arrow) marking the next shorting opportunity. Again note that across the last 3 price peaks in the last 4 wks, there has been bearish divergence on the %200 for NYA and SPX.

What comes next? Well at a minimum, I expect a greater than 61.8% retrace of the rallly off the Jun 4 lows as mentioned 2 wks ago in the discussion with IYB et al. That would suggest the 1305-1310 area. Since this is a reactive thrust rather than an initiation thrust, also on the table though is a greater than 61.8% retrace of the whole enchilada off the Oct 2011 lows which targets 1200-1225 area on a closing basis.

Will history repeat itself? The internals have given me a map. Lets see if price will cooperate. Something to chew on. Enjoy and comments welcome.


Chart Might need to be a stockcharts sub to see all details.


Doc

http://stockcharts.com/c-sc/sc?s=$NYMO&p=D&yr=3&mn=7&dy=0&i=p22499274625&a=271408913&r=1342901098969.png

Previous thread:Link

Closeup charthttp://stockcharts.com/c-sc/sc?s=$NYMO&p=D&yr=2&mn=7&dy=0&i=t01205589765&a=271408913&r=1342910039839.png

Great analyses Echo. Sounds like a precursor to forming a long term base.

Edited by orange, 21 July 2012 - 05:40 PM.

Agree, internals just not there on this move back up. What concerns me is that so many on the board are in agreement, it's rarely ever been that easy. That's why I'll be hedging, I don't care if I just break even, I just don't want to lose. Nevertheless, this does look like an IT short to me. NYUD is repeating the May top pattern.

NICE Thanks for your time and effort! It will be fun and informative to watch it unfold.

Great charts. This has all the patterns of a dieing bull market, that just wouldn't die One idea I was playing around with to measure the market thrust is to measure the strength of the volume summations, during the initiation phase. (simple difference between the dots, as %) This latest thrust by that measure was very weak.

Edited by ogm, 21 July 2012 - 06:16 PM.

Great idea. Markets advance most easily when they are in sync. Right now, after being above the zero line for 4-6 weeks, the nasdaq MCO, NAMO, is due for some time below the zero line. This comes right as the NASI is struggling with the zero line. If NAMO goes negative, of course, so will NASI in this case. Unless of course, AAPL does what GOOG and MSFT could not...support the market for another ever narrowing breadth rally... Thanks for the kind words. Doc

Edited by Echo, 21 July 2012 - 06:27 PM.

Hi Doc! Thanks for the great visuals to stir up the braincells.

Great work Doc! Thanks. Btw, I'm now using your chart you first put up a couple weeks back and I appreciate it VM. And I've been studying these same elements this weekend, but now as I read through your charts and analysis above, you've moved that process along nicely and made my job a whole lot easier. Good good stuff.