Market Direction and Stock Trends

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Mike Burk: Technical Market Report

* December 3, 2016

The good news is:

• The Dow Jones Industrial Average (DJIA) hit an all time high last week.

The negatives

The DJIA hit an all time high Thursday that was unconfirmed by all of the more broadly based indices and the AD lines. Also another Hindenburg Omen was triggered Thursday. These are all precursors to cyclic market tops, however they are not predictive.
Advance Decline lines (ADL) are running totals of declining issues subtracted from advancing issues. There properties vary and change. About 50% of the issues traded on the NYSE are fixed income related. If interest rates are stable, fixed income issues gain in value daily until the dividend is paid and on that day they drop in value by the amount of the dividend. AD lines of fixed income issues have a wildly positive bias.

The positives

. . .

Seasonality

Average returns for the coming week have been modest, but a little stronger during the 4th year of the Presidential Cycle than other years.

Conclusion

A rapid rise of the major indices to new highs unconfirmed by the breadth indicators has been a frequent occurrence at a cyclic market tops. The problem with that scenario is, until a week ago, the secondaries led the charge upward. Seasonal weakness for the next 2 weeks should give the market a chance to consolidate.
I expect the major averages to be lower on Friday December 9 than they were on Friday December 2.
Last week the DJIA was up while the rest of the major indices were down so I am calling last weeks positive forecast a tie.

Good Luck,
Mike Burk

http://www.safehaven.com/article/43192/technical-market-report-for-december-3-2016

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