Saturday, January 09, 2010

Indicator Update for January 9th

Here's this week's roundup of the indicators that I track each week. Please note that indicators are updated daily prior to the market open via Twitter; you can follow the Twitter stream here.

* SECTOR TECHNICAL STRENGTH: We saw a significant increase in the Technical Strength (short-term trending) of the eight S&P 500 sectors that I track weekly (bottom chart). Five of the eight sectors are registering bullish strength; none are significantly bearish. We saw particular gains of strength among Industrial, Health Care, and Financial shares. Two sectors, Consumer Discretionary and Technology, lost strength from the prior week. The commodity-related Materials and Energy sectors were two of the strongest on the week.

* NEW 20-DAY HIGHS/LOWS: New 20-day highs expanded from the prior week (middle chart), with the first three days of the week showing more than 2000 new highs. That trailed off on Thursday and Friday, suggesting some narrowing of the market rally, but we are not as yet seeing a worrisome expansion of new lows. At a broader time horizon, we continue to register fewer new 52-week highs relative to October's peak; note also the non-confirmations from international indexes. As long as new highs continue to handily outpace new lows, I don't view these non-confirmations as decisive, but should we show deterioration in the indicators alongside these non-confirmations, I would become more defensive.

* ADVANCE/DECLINE LINE: The advance/decline line specific to NYSE common stocks, posted by the helpful Decision Point site, reached bull highs this past week, as advancing stocks led decliners for four of the five trading sessions. This indicator remains bullish as long as we stay above the September/October peaks.

In all, the stock market continues its recovery, fueled by accommodative monetary policies. There are short-term indications that the rally is getting tired, but as yet none of these threatens the market trend.