Jerry Samet
08-06-2016, 11:56 AM
The market had a strong rally yesterday in response to a stronger than expected employment report. After a strong open the major averages rose to solid gains and then held those gains for the rest of the session. The fact that there was no profit taking later in the day is a sign of support as market participants held their positions. The COMPQ gained 1.06% on the session while the SPX rallied .86%. Both closed at their intraday trading highs, a good sign. Volume was higher across the board and above average on the Nasd. This means that yesterday was a solid accumulation day and that large institutional players were buying stocks. Leading stocks were higher as well with the leaders index rising .60% on higher and above average volume. This produced an accumulation day on leading stocks as well as the major averages. The index finished in the upper half of it’s intraday range, but not at the highs that the major averages did. The relative strength line of the index is looking a little sickly as quality growth stocks continue to lag the overall market.The index is now right at the confluence of the 9dma and the 17dma. It must break above this important resistance level with conviction to confirm the move of the major averages into new high ground. The New York averages had been consolidating for the last couple of weeks. That changed yesterday as they all broke into new high ground and set new all time highs. The fact that the move was backed up by higher volume is encouraging. The Nasd averages continued to move higher. Most experienced market participants would agree that this is a manipulated market and that the central banks have been driving asset prices higher. This has distorted markets and most indicators and methods that have worked for decades are misfiring. The most important indicator that I use to tell when we are in a new cyclical bull market is the monthly Coppock. It has an almost flawless track record going back over a hundred years. The monthly Coppock gave a buy signal on the Dow at the end of February. This was followed by a signal at the end April on the SPX. There was another signal last month on the COMPQ. I am usually very happy when this happens as the first two years of a new bull cycle usually produce the best gains. I have been a little skeptical of this signal as we are in a market environment we have never seen before. It is funny though that the signal was followed by the best rally we have seen in a year or two. We had a period of over a year when the market trended sideways to slightly down, but didn’t produce the type of decline you usually see in a bear market. This reminds me a little of 1994. In that year we had what is now called a stealth bear market where the major averages declined for the entire year, but didn’t produce the large decline you usually see in a cyclical bear market. That was followed by a monthly Coppock buy signal in January 1995 and a new cyclical bull market. 1995 was a great year and produced one of the best intermediate rallies I have ever seen. I don’t know for sure what is happening now and if this is a new bull market or not. The interference by central banks makes this analysis very difficult. The bottom line right now is that while this rally is not as strong as you usually see in the early phase of a new cyclical bull market, stocks are working and the major averages are moving higher. Play it while it lasts, but keep these factors in mind. Jerry