Stocks Rally But On Weak Internal Structure

This week was very interesting in terms of price development in the Stock Indices. The Fed Chairman came out with market moving news on Wednesday and there is anticipated news coming out of the G-20 meeting tomorrow. Both of those will likely move prices.

The current situation with the Indices is price action was strong this week, suggesting the countertrend move lower is complete. The problem is the internal structure of the rally is weak and potentially getting weaker. New lows are increasing once again. Market breadth is diverging from price and volume is extremely low. All of this suggests the greater probability is for price to once again correct to the internal structure. However, there is always a smaller percentage of time when the internals will correct to support price. That typically will happen around a news event, where the perception of value has changed on the part of market participants. Therefore, Saturday’s announcement from the G-20 can change everything.

If the internals do not strengthen to support price, expect some type of move back down. If the internals strengthen on Monday with any move higher, the probabilities have increased that a bottom is in and we are off to test and likely take out the all-time highs.

DAILY BRIEFING 181130 from Joe Mertes on Vimeo.

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