Last week's indicator review noted signs of strength in the new high/new low data and particularly in the cumulative NYSE TICK measure. That strength carried over through Monday's session, as we saw an expansion in the number of stocks registering fresh 20- and 65-day highs (second chart down) to the highest levels since the July lows. We continue to register moderately overbought readings in the Cumulative Demand/Supply Index (top chart); this measure tends to top out ahead of price, suggesting that we could see further price gains ahead.
That having been said, we saw some weakness in the Cumulative TICK following Monday's session, indicating a pickup of selling pressure. While NYSE common issues have been trading in a range, with modest advance-decline strength (second chart from bottom), there has been significantly greater strength among small caps (bottom chart). I will be watching the large cap/small cap relationship closely, as weakness in the latter--combined with weakening TICK--would suggest a stalling out of the recent rally. Of particular concern for bears would be an expansion in the number of stocks registering fresh 20-day lows, a figure I track each morning via the Twitter posts.
As mentioned last week, I continue to view this as a rally in a bear market. Money flows suggest that we are not seeing significant commitments of capital to stocks and I remain concerned about the financial stocks, which have been looking stagnant when compared with other sectors. The relative weakness in the cumulative TICK is a new development; I'll be tracking that closely this week.
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