Saturday, October 18, 2008

Not Much of a Bounce So Far

Although we had a very healthy bounce off the market lows, that was soon erased by follow-up selling last week. As a result, the advance-decline line for NYSE common stocks only, as tracked by the excellent Decision Point service, has barely lifted off its lows (bottom pane, above chart). On Friday, we had only 37 new 20-day highs on the NYSE, against 383 lows. The previous day, we registered 21 new 20-day highs on the NYSE against 487 new lows.

Among the 40 stocks in my basket that are evenly divided among eight S&P 500 sectors, none qualify as being in uptrends by my Technical Strength measure, three are neutral (MO, JPM, WFC), and the rest are in downtrends. Quite a bit of technical damage has been done to this market; it's going to take time--and greater follow through in buying interest--to reverse that.


John C. Lee said...

Hey Brett,

Love the psychology articles, downloaded all of them a few months back. Great work.

1-day bounce killed it for longs who bought on Monday. We're forming a symmetrical triangle, and consolidating. I'd say we have an equal chance of a breakout of breakdown.

Brett Steenbarger, Ph.D. said...

Hi John,

Thanks for the comment; I agree: a meaningful move will come out of the current consolidation. So far I'm seeing it as part of what could be an extended bottoming process intermediate-term.