Stock Market Indicator Update for a Bearish Wednesday AM

* Momentum - With the break below the multi-day trading range on Tuesday, we saw a resumption of weak momentum numbers, with Demand at 18 and Supply at 101. That means that we have roughly six times as many stocks across the NYSE, NASDAQ, and ASE closing below their volatility envelopes surrounding their moving averages as closing above them. We're seeing 17% of NYSE issues trading above their 50 day MA--very weak--but we are not yet at that 20% benchmark for % issues trading above their 200 day MAs that has marked bear market lows (though we're getting closer at 25%).

* New Highs/Lows - On Tuesday we saw an expansion of stocks making fresh 20-day lows, with 615 new highs and 1926 new lows. Interestingly, this is fewer new lows than we saw last week. I will be watching carefully to see if this divergence continues. We continue to see an unusual divergence in the Cumulative TICK, which was only modestly weak Tuesday. Among common stocks only traded on the NYSE, we had 13 new 52-week highs and 277 lows. This also is weak, but represents fewer new lows than last week.

* Technical Strength - Among my basket of stocks, we have 7 issues ending Tuesday in uptrends, 6 neutral, and 27 in downtrends. Thus we see continued weakness, although not at the extreme levels seen last week. My Technical Strength Index finished at -1580.

* Advance-Decline - The Advance-Decline Line specific to NYSE common stocks continues to make new lows and is clearly bearish. Significantly, we saw new lows in the AD Line specific to S&P 500 stocks. The weakness has clearly spread to large caps, as the recent INTC weakness attests.

Bottom line is that we're seeing some interesting divergences, but the indicators remain in negative territory, we're not yet at bear market extremes in my longer-term momentum indicators, and we're seeing continued weakness in the advance-decline lines. I am not inclined to chase lows this AM--a lack of downside follow-through could lead to sharp short covering--but neither am I stepping up to the plate on the long side for anything more than short-term trades at this juncture, given the indicator status.

RELEVANT POST:

Most Recent Indicator Review
.