During the multi-week trading range that we've seen for much of November and thus far in December, we can see that 20-day highs have generally outnumbered lows (top chart), with the Cumulative Demand/Supply measure (middle chart) squarely in neutral mode. This suggests that we are neither meaningfully overbought or oversold with respect to the number of stocks trading above or below the volatility envelopes surrounding their moving averages.
We can also see from the advance/decline line for NYSE common stocks--a very nice display from Decision Point--that we have seen very little deterioration in the broad market despite the recent weakness of small caps and the extended trading range. If that A/D line stays above its late October lows and new highs continue to outnumber new lows, I would view the recent corrective action as a springboard from which we could see meaningfully higher prices.
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