Weekly Report

The way this rally is occurring is a bit of a surprise, as the market is broadening out with improvement in small and mid cap stocks.  We are close to a new Dow Theory buy signal (we need to exceed the December high.

The breadth over the last couple of days probably puts to rest the chance of a Zweig Breadth Thrust, but regardless of whether or not we get that signal, there has been substantial improvement in breadth – a bullish development.

Breadth has improved dramatically.  We will use pullbacks in stocks to add them if they get to our prices.

We still believe a rally into the end of the year is likely, as the current oversold readings support a seasonal advance.  There are some real signs of rotation in the market but nothing that prevents our yearend rally scenario.

The McClellan Oscillator, one of my favorite short-term indicators has turned up from a low level.  Daily stochastics on SPY and QQQ are now oversold and in position to turn up in buy recycles.

SPY should hold 660 to 650 if we are going to be right about our rally scenario.  Watch Value stocks as they should start to show even more relative strength.  Our contention is that the Dollar is a bullish pattern, and that a move back above 100 could be the signal for the start of a new rally.

We don’t have any changes to our equity market outlook, so I we can have a little bit of fun in this piece.