Market breadth – Even More Worry Now:

Just the repeat once again on market breadth “The Advance / Decline Line (AD line) is one of the most widely used indicators to measure the breadth of a stock market advance or decline. The AD line tracks the net difference between advancing and declining issues. It is usually compared to a market average where divergence from that average would be an early indication of a possible trend reversal.”

The last time we looked – a few days ago with the S&P500 at all time highs - the NYSE A/D was still not confirming the recent advance - a sign of thinning leadership. Now on Friday the Standard & Poor’s 500 Index fell from a record, while small-cap shares sank and Alibaba Group Holding Ltd. rallied in its debut. Commodities declined to a five-year low and the U.S. dollar advanced pushing Gold to an eight-month low, while silver hit the cheapest level in four years.

The breadth problem is still acute as displayed in our latest NYSE A/D line chart. Now we see the S&P500 (last Friday) at an all-time high and the lower A/D Line failing to break above their respective July 2014 highs – it is still to early to call a breakdown – but we need the A/D line to hold at the early August lows to complete a shallow A-B-C type correction.

Market breadth – Some Worry Now:

Just the repeat once again on market breadth “The Advance / Decline Line (AD line) is one of the most widely used indicators to measure the breadth of a stock market advance or decline. The AD line tracks the net difference between advancing and declining issues. It is usually compared to a market average where divergence from that average would be an early indication of a possible trend reversal.”

The last time we looked – back in August 18 the S&P500 was at all time highs and the NYSE A/D was still not confirming the recent advance - a sign of thinning leadership. Now the breadth problem is acute as displayed in our latest NYSE A/D line chart. Now we see both the S&P500 and the lower A/D Line failing to break above their respective July 2014 highs – so now we need the A/D line to hold at the early August lows to complete a shallow A-B-C type correction

The problem with gold:

Investors and traders in the gold complex are running out of patience in reaction to the slump in the sector following an early summer rally. Nothing is working be it seasonal, Russia or the so-called extended global equity markets.

I think our dollar/gold chart pinpoints the real problem – the strong U.S. dollar which has been the go-to place – well since early summer. As we can see the price relationship is somewhat inverse – dollar up – gold down and vice-versa as displayed by the lower US$ vs. gold study. The big disappointment for gold investors was due to the early summer advance in spite of the dollar advance – this appeared to be a set-up for a dollar peak which did not occur. Let us see if the US Dollar index trades back up to the 84 level – or the $23 level on the UUP – and then look for the gold complex to rally.