Last week's indicator review found that we stood in a wide trading range defined by the month's highs and lows. With strength early this past week and weakness following, that situation has continued. We continue to trace lower highs and lower lows in the Cumulative Demand/Supply Index (top chart), suggesting that fewer stocks over time are displaying significant upside momentum. New 65-day highs have also tailed off on market bounces, indicating less participation to the upside (second chart from top). Sectors, meanwhile, remain in a range bound mode for the most part.
The Cumulative TICK (second chart from bottom) has leveled off, but is not in a downtrending mode. Interestingly, we did not make lower lows in the advance-decline line specific to NYSE common stocks last week, but did make lower lows in the A/D line for small caps, as the chart from the excellent Decision Point service indicates. I will be watching the small caps closely along with Cumulative TICK, as I suspect they will point the way toward either a resumption of the wide range trade this week or a breakout to the downside.
In the large picture, we are experiencing resistance at the early 2009 highs and could view all of the present action as within a range defined by the 2009 highs and lows. Should we expand new 20-day lows beyond the levels seen in the last two weeks (roughly 600 across the NYSE, NASDAQ, and ASE), I would view this as an intermediate term correction and the start of a possible move back into the broad range defined by those 2009 highs and lows. Until that time, however, I continue to view us as within the May range, leaning toward fading range extremes unless expanding new lows and collapsing NYSE TICK tell us otherwise.
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