* Highs/Lows - As you can see from the top chart, we moved lower last week, but new 20-day lows remain well off their levels of last month. We are likely to see divergences on further price weakness, something I'll be watching closely. Friday actually saw an improvement in new highs (516 vs. 449) and a reduction of new lows (394 vs. 607) relative to Thursday despite price weakness in the large cap indexes. Let's see if that translates into a bounce early this coming week.
* Overbought/Oversold - The Cumulative Demand/Supply indicator that I recently highlighted is now at a neutral level (bottom chart). Note that we're continuing to see peaks in that measure at lower price highs, which is exactly the pattern we look for under bear market conditions. So while I think we could be early in a process of bottoming, I'm still counting this as a downtrend.
* Sentiment - Short-term sentiment, as measured by the Adjusted NYSE TICK, turned distinctly negative last week following a period of considerable strength. Four of the past five trading sessions showed a distinct bias toward hitting bids among NYSE issues, a significant turnaround from the period following the January lows.
* Momentum and Strength - We continue to see weakness on a longer-term basis. Only 22% of stocks in the S&P 500 Index are trading above their 50-day moving averages; that figure is 32% for S&P 600 small caps and 20% for the NASDAQ 100 issues. Among the stocks in my basket, we see low Technical Strength readings. Only 3 stocks are trading in uptrends, 9 neutral, and 28 in downtrends. At -1840, the Technical Strength Index is definitely weak, though off the levels we saw at the January lows.
* Advance-Decline - We are hovering modestly above the January lows in the Advance-Decline line specific to the NYSE common stocks and the stocks in the S&P 500 large cap and S&P 600 small cap indexes. We actually made a fresh A-D Line low last week among the NASDAQ 100 issues.
In sum, we have backed off last week's highs and are poised to test the January lows on further price weakness. Should this occur, I'll be looking for divergences and possible buying opportunities. Although there are some good historical reasons for looking for a bottoming process going forward, it's also true that prices can move well below their downside momentum peaks before sustaining a turnaround. For that reason, I'm keeping powder dry at this point.
RELEVANT POST:
Last Week's Indicator Update
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4 comments:
Again, this divergence is positive.
Brett
To add to your indicator update, looking at Market Profile charts for S&P for last week, the volume on downs day was lower than the volume on the up day , ie , last Thursday, where the attempted direction was up.
To begin the new week on Monday, we would be looking at Friday's closing balancing, ie inside day as the first reference.
We could go with any breakout from the inside day, and any return to value away from Friday's inside day, could signal a reversal from the original directional move.
S&P ended last week on an inside day, and I am attempting to read Market Profile charts.
anatrader, I agree,the inside day portends change. The range of these days is quite large. Even an inside day is over 20 pts. The 200 day avg range in the S&P is around 12pts. The 1357-61 area has a block of selling volume that on 2/5initiated the move into consolidation. That area might act as resistance first time up if we break up over the consolidation, I hope there is a retracement that allows be to have a good trade location moving up. I would though trail a stop say 6 pts back after I get an intial 6 points, to hopefully catch a good portion of any short covering rally, and or initiative buying and still protect myself for a move back down toward a test of the mean area from the 2day consolidation area which is around 1333 if the rally fails. If that occurs on decent volume a move to test the 17's might be good for a bounce first time down as it is a volume cluster that sent the market upward. If that breaches, I would look to sell any rally for a retest in the 12's. It will be insightful to see where the inventory or lack of is during the overnight hours. Steve ~SSK~
Hi SSK
Thanks for your analysis; I am still very new to MP learning each day through osmosis under my mentor at his website:
http://tradingsuccess.com/blog/
Ana
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