Indicator Update for March 10th

This will update my recent post on the market indicators and some of the conclusions from that review. Blogger is not allowing me to post charts, so please excuse their absence.

* New Highs/Lows - Friday we saw levels of new lows consistent with recent momentum lows in markets. There were 224 new 20-day highs against 3150 new lows. We also saw 97 new 65-day highs across the NYSE, NASDAQ, and ASE, against 1225 new lows. This represents significant weakness, but so far remains below the level of new lows registered in January. Similarly, if we just look at the common stocks traded on the NYSE, we had 7 new 52-week highs, but 246 new lows. Note that 52-week new lows in January swelled to over 700. Among S&P 600 small caps, Friday had 2 new 52-week highs and 80 new lows. (January's new lows exceeded 200). And finally, among the S&P 500 large caps, we had no new highs and 73 fresh annual lows. (January's new lows also exceeded 200). Long story short, there are divergences in the high/low data that make me question the downside from here.

* Sentiment - As my recent post indicated, sentiment is quite bearish and is beginning to hit levels associated with recent market bottoms. Shorter-term, we continue to see weakness in the NYSE TICK, with the cumulative line in a clear downtrend. I need to see evidence of buying interest in the TICK before aggressively pursuing the upside in this market. Seven of the last eight trading sessions have seen net selling in the Cumulative Adjusted TICK; my breakdown of buying vs. selling interest shows overwhelmingly above average selling pressure during that time. The coast is not clear for bulls unless and until this selling pressure abates and we see evidence of above-average buying (which has occurred only once in the past eight sessions).

* Overbought/Oversold - My Cumulative Demand/Supply indicator is a hair breadth away from the -30 level that has typified recent bottoms in the stock market. Supply has exceeded demand for six of the past seven trading sessions, which shows unusual sustained selling activity. (Recall that Supply and Demand are indexes of the number of stocks closing below vs. above the volatility envelopes surrounding their moving averages). Longer-term, we have 18% of SPX stocks trading above their 200-day moving averages and 14% trading above their 50-day moving averages--quite oversold, but still above the very low levels registered in January(14% and 8%, respectively).

* Advance-Decline Lines - We're seeing new lows in the AD Lines for NYSE common stocks and for NASDAQ 100 stocks, S&P 500 stocks, and S&P 600 stocks. It is clearly premature to be aggressively buying the market while this indicator remains in a downtrend across the board.

In sum, we're seeing levels in the indicators consistent with momentum market lows. Price lows can occur beneath such momentum lows, so it is not at all inconceivable that we could see more downside in the days to come. Indeed, recent activity has been skewed solidly to the downside, making bottom-fishing dangerous. Still, for the first time in this bear market, we're seeing divergences in the data even amidst the selling pressure and bearish sentiment. That has me questioning the longer-term viability of the downside.
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