Weekly Trend and Trade Review

Trader Talk

The short term momentum oscillators remain negative, non-confirming the bullish stance of the AlphaKing Trading indicator. The accumulation/distribution profile remains positive, with zero distribution days since the new buy was issued. The leadership profile remains mildly negative, with Friday's close yielding 65 stocks making new 52 week highs versus 127 stocks making new 52 week lows.

The 4% rule remains positive, confirmed with bullish Federal Reserve policy. The VXO volatility indicator closed the week at 22.6, remaining in the complacency camp. The primary Elliott wave count continues to suggest a wave 2 counter-trend advance within a bear market continues to unfold. If so, the wave 3 melt-down run should start once the near double top, or actual, double topping pattern completes. A move above the October 2007 highs negates this bearish view, and would confirm a new cyclical bull market underway. Such new highs are a very long way away.

Traditional seasonal trends have us looking for a difficult third quarter for the bulls after a modest summer rally attempt stalls, while the Presidential cycle remains bullish for the remainder of 2008. The Benner-Fibonacci cycle will remain bullish until 2010, though this prolonged time period may include one or more cyclical bear phases. The AlphaKing combination cycle sees a bear market slump running all the way into mid-December when the next major turn-date is slated to land.

Summary:

Overall we would suggest the trading action this week should be forgotten as meaningless. The news was mediocre - for a change - and trading run on super light volume. Every rally was met with a sell-off, and every sell-off met with a rally. Next week - following the markets being closed on Monday for the Labor Day holiday - should be more normal in both trend, meaning, and volume. While our indicators remain bullish, our overall view is that we are in some kind of bear market counter-trend advance, and as such we believe it is simply a matter of where the stock indexes run into trouble, rather than if they falter. That said, the overall technical set-up ex-volume suggests another big leg up for the stock indexes is the more likely outcome going forward. Don't try to over think things at this juncture, as there simply is not enough information to make an accurate assessment of what comes next. Patience, Grasshopper, patience. And, yes, I will take another cold one to go with that dog. Happy Holiday, fellow workers.

Kevin Wilde, Chief Trading Strategist, AlphaKing.com

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