Tuesday, May 19, 2009

Indicator Update for May 19th

Last week's indicator review found that buyers continued to hold the upper hand in the market, with signs of bullish sentiment and sector behavior. Since that time, we did see selling into the end of this past week, taking most of the S&P 500 sectors into neutral trending territory. While new 20-day lows exceeded new highs on Wednesday and Thursday--the first time that has occurred since the March rally began--that situation changed by Friday, as new lows in the large cap indexes were not widely confirmed. With Monday's impressive rally, we now stand in a wide trading range defined by last week's price lows and the bull move highs.

We are tracing a pattern of lower highs in the Cumulative Demand/Supply Index (top chart); once those peaks are no longer accompanied by fresh price highs, we will have a potential intermediate-term sell signal. Similarly, any tests of the bull highs that fail to expand the number of stocks making fresh 65-day highs (middle chart) and/or fail to make new highs in the advance-decline line posted by Decision Point (bottom chart) will lead me to expect continued range trading, rather than a resumption of the bull. Conversely, should we see expanded participation in a new leg up, that would be a powerful sign of an ongoing bull market.

I am expecting last week's lows to hold this week, as trade will likely become quieter heading into the holiday weekend. Should we break those lows across the major indexes, that would be a clear indication of fresh downside participation and would almost certainly turn the indicators bearish on an intermediate-term basis.

I will be updating the indicators each morning prior to the market open via Twitter (follow here) and will be posting intraday market updates to the blog as time permits.

1 comment:

OKL said...

right now the way i see it is that the inter-market relationship is giving the green light, especially with the Euro and Crude.

treasuries are a bit of a mixed bag, especially cos there's some treasury announcements coming up before the long weekend and im not sure how the bond market will react to those, in addition to the confusion i interpret in the treasury market.

i think there's a window of opportunity this week for the bulls to break 927 or get there, but im not sure if the 'bondies' might be interested.

with regards to the investing vs trading mindsets, i often wonder if reading/thinking too much about that causes traders to jump ahead to conclusion; as you mentioned in your book- backward analysis.

im still struggling with this, given my own personal interest in economics, but the way i deal with it is to tell myself that economics have cycles that are waaaaay longer (decades even) and as such, have very little to do with trading/markets, even though the latter is a subset of the former.

another way i do it is... i try to only read up/think/write about economics during the weekends, with as little as possible during weekdays and ONLY AFTER i've digested the day's trading events and my own trading journal.

the end result is i dont usually have much energy to think about economics/investing during weekdays lol... not such a bad thing i guess.

cheers doc! at the rate you're going, you're well on track to break april's record of 80posts lol

can't help but suspect you might be thinking about a 'subscription service'... heh, back to the markets!

thanks for everything!