Trader's Tips Stock Market Newsletter

Published December 04, 2006

Economic Facts

The November Consumer Confidence Index fell to 102.9. Here is also a chart overview of current Home & Auto Sales. Manufacturing slowed down in November, for the first time in 41 months.

Transport Sector Chart Update ..."The Transport Sector can give clues about the development in the economy. I.e. more activity in transport companies often reflect more activity and orders for companies in general, which is positive for the stock market and vice versa."...

consumer confidence

Chart courtesy of

Stock Market

The broad market has reached a quite overbought condition, as indicated by current BPI readings, which closed at 73.15 Friday. Strong sell signals occur when this indicator goes above 70%, and then reverses down by at least 6%.

(NB. If you use Windows XP and charts seems compressed and difficult to watch, place the mouse arrow at the bottom right corner of the chart until a button shows up, then click to expand the chart.)

While the OEX has steadily gained ground in an Elliott Wave 3 impulse from the July low, this is not the case for RSI 25 which has traced out a clear bearish divergence vs. November's new high in prices... a strong warning for the market. Usually, when RSI 25 climbs above 60 significant tops are forming. A reading above 75 is a rare observation in RSI 25, driven by the strong impulse wave from July. Any clear daily close below this trendline would give more evidence of a completed wave 3.

In the bigger picture, the market development from the Oct. 2005 low is best interpreted as a last wave 5 of a five wave impulse structure from 2002 or a wave C as part of an A-B-C zig-zag from 2002.

For other Elliott Wave opinions and advanced technical analysis comments from experienced traders, Dominick's Trading The Charts Forum is out with a monthly update.

Also, speaking about the Elliott Wave Principle i highly recommend seeing this video "History's Hidden Engine", the documentary by award-winning filmmaker David Edmond Moore, available here. Download and Stream now, at no cost.

The OEX Monthly chart shows the market is close to the key (61.8%) Fibonacci retracement zone, of the 2000 - 2002 major correction. Often, when the key Fib. level is reached, market reversals are the outcome. In addition, the OEX passed the important 11/28 Bradley date last week, so if the market breaks below the trendline mentioned above, odds are good a top is then confirmed in place.

The November trading month brought QQQQ Monthly prices up against important trendline resistance, (coming in from 2004) which caused the high for the month. Longer term momentum in this Nasdaq 100 index tracking stock has at the same time entered overbought territory, as reflected by Stochastic.

"Smart Money" (commercial traders) is still heavily net short (in blue) the S&P 500 futures market, despite the strong advance since July. COT Chart (commitment of traders)

From a Volume point of view, the two significant buying surges during the decline in July and mid-October of 2002, have yet to be surpassed by any selling surges (during the market advance since then) of a similar magnitude, that would oppose the strong accumulation of buying volume seen in 2002.


Chart courtesy of

Other updated charts:
QQQQ Daily
Nasdaq Comp
Weekly Cycle10
Weekly VIX (volatility) broke out to the upside.
Gann Angle Chart
Advanced Get Wave count, short term.

The Google stock finally managed to brake out to the upside from the Triangle. "...Symmetrical triangles opens up good trading opportunities, by acting on a clear price breakout from the triangle (closing basis)."...

BPI reached 73.15 Friday. Readings above 70 is considered overbought. See description below the chart, for when stronger sell signals are generated.

AAII Sentiment Ratio is giving a mildly bearish reading, as of 11/24. A move above 70% would be a bearish indication for the market. See more description details below the chart.

TYX reached the suggested 5.2 zone before heading south. Important trendline support is broken. A bearish channel is also established.

The Dollar woke up from it's sleepy state by bearish forces taking it below strong trendline support. It's probably going for a test of the 2004 low and may have reached an oversold RSI 25 condition at that point. As the chart proves, significant advances have started after RSI 25 dipped below 30.

Both Gold and the XAU (Gold & Silver Index) broke out from Triangle patterns, to the upside.

OIL has recovered and is going for a test of the important high made earlier this year. The RSI divergence is a warning sign and OIL may resume it's overall bearish trend, should it stall below that high.

Real Estate
Since 2004, RSI 25 is making it's 4th divergence peak vs. the higher highs in the Dow Jones REIT Index. since then. Interestingly, when RSI 25 reached the 70 level in all those cases, a correction towards it's 50 EMA has been the outcome. So this may happen this time too, given it's current reading of around 70.

Forex - EUR/USD Currency Pair   10 pips a day system
The result of the Dollar falling below long standing trendline support is a soaring EUR/USD pair (weekly rates).

Updated EUR/USD Daily Chart & Cycle10

Here is a longer term chart of the EUR/USD, which also includes an Elliott Wave count as currently interpreted by the Advanced Get software. The Elliott Wave Oscillator is usually good at filtering out minor price "noise" and tend to show true trends.

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