Last week continued the pullback from the momentum highs noted in the previous indicator review. We can see from the Cumulative Demand/Supply Index (top chart), a cumulated measure of upside and downside momentum, that we are at oversold levels. These levels are close to those that have typified intermediate-term bottoms since 2007.
Note that we've broken down in the 20-day new highs/lows (middle chart), with many more stocks registering intermediate-term lows than highs. Indeed, the number of 65-day lows on Friday was greater than any level posted since the July bottom.
Finally, we see from the excellent (bottom) chart from Decision Point, that the advance-decline line specific to the S&P 500 stocks is approaching its lows from July and August. These levels, both in the A/D line and the new highs/lows, should represent meaningful support if the longer-term uptrend is to remain intact. Taking out those summer levels would suggest a more significant, longer-term corrective process.
At this juncture, I expect those summer levels to hold, placing us at the very least in a broad trading range and setting us up for an eventual test of the bull highs. The indicator readings, however, are losing strength--not bottoming out--so I am not in the mode of catching falling knives. Should we see evidence of diminished selling pressure and downside momentum this coming week, I will likely be nibbling at the long side.
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3 comments:
DR. Brett, appreciate all the hard work you put in, top notch. See below, you may also want to implement this translator so more people can enjoy your work. It is easy, I can send you the link if you wish.
MOO hooked me up with a Google Translator, it was very easy to implement, just back up the HTML in case things blow up, and they didn't. My wife says the translation to Japanese is "acceptable" in other words...the idea is translated, although the grammar is not perfect, acceptable none-the-less.
Here Is Hawaii Trading in Russian
http://screencast.com/t/kJUiAMmV04fp
This shows all the languages that can be translated currently
http://screencast.com/t/YHL0mgEb
The translator is WAY at the bottom of the page, give it a try, review your Spanish, German, whatever, Estonian
http://oahutrading.blogspot.com/
I'm gonna disagree with you this time Dr. Brett, I think 7 months of record-breaking gains, headed into October, with a hideous macro environment, means the highs have been reached for the next few years at 1080ish. The tape looked fugly this week too. . .
The problem I have with the Decision Point chart is that the X-axis (i.e., time) is not labeled. I can't tell if the chart represents 10 minutes or 10 months or 10 years. Without a chronological frame of reference, it's meaningless to me.
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