update

I'd like to update my views on the US stock market averages although not much has changed since my last post on the subject.

It now looks like the Lindsay projections for a July top are off the mark. As with most forecasting methods Lindsay's allows one to stretch projections out a bit and even distort them to fit your own preconceptions. But this is generally a fruitless effort so for the moment I'd say that Lindsay does not have much to say about the prospects of a bull market top in this general vicinity.

The same remarks apply to my various interpretations of the three peaks and a domed house formation. While some are still viable the steady creep upwards in this market is not characteristic of the 3PDH formation so for the moment I am not putting much if any weight on that analysis.

As you can see in the top two charts the Dow and the S&P 500 remain well above their 50 day moving averages (green lines) and above their 200 day moving averages (red lines). The Dow has yet to move above its mid-July high even as the S&P has done so. The NYSE advance-decline line also shows a minor bearish divergence from the S&P price action. But minor divergences such as these are fairly common and without more evidence I have to stay on the bullish side of the market.

Only a drop in both the Dow and in the S&P below their respective 50 day moving averages would turn me bearish, and even then I would only be looking for a drop to their respective 200 day moving averages or a little below.

The bottom two charts suggest that the upswing from the July 18 low has a fair amount further to travel. You can see that the 10 day moving average of the NYSE advancing issues reached oversold levels comparable to those at the February 5 low. That low was followed by a 240 point rally in the S&P. A similar rally from 1940 would put this average at 2180 although I think this is a tad optimistic. But a move up comparable to the 175 point rally from the April 14 low, a swing which would carry to 2110, is well within the realm of possibility.

The bottom chart shows the 5 day moving average of the CBOE equity put-call ratio. You can see that it reached a low (bearish) level just before the July 3 top and has since been rising. I don't think there will be any danger of an extended decline in the averages at least until this put-call ratio drops close to its late June levels.