Market Note for Wednesday

Interesting to see a strong up day (Tuesday) as an inside day. The bounce improved some of the indicator readings, but again it's the follow-through that we need to see. Note the important support formed over the last few days in the NQ futures. That's what's going to break if we get the capitulation scenario, and that's what needs to hold to initiate a bottoming process here. We're seeing 26% of S&P 500 stocks trading above their 50-day moving averages and 38% above their 200-day MAs. Those figures are weaker for the S&P 600 small caps (18% and 26%, respectively).

Some indicators weakened, however. Among NYSE common stocks, we had 15 new 52-week highs, against 193 new lows. Interestingly, that's an expansion of new lows relative to Tuesday. We saw a marginal expansion of new 20-day lows across the three exchanges: 220 new 20-day highs and 1793 new lows. Among the stocks in my basket, we had 4 that were technically strong at the close, 6 that were neutral, and 30 that were weak, a bit of improvement from Tuesday. Until we see a drying up of new lows and sharply stronger momentum figures (Demand/Supply was 59/41 on Tuesday), I will continue to keep powder dry.

Once again, a monitoring of interest rates and the Yen, as well as those critical bank and homebuilding stocks, will tell us much about the market's risk appetite.