The most recent indicator review found continuing market weakness and, once again, we've seen more of the same this past week. The adjusted Demand/Supply Index (top chart) finally hit the -30 level that has been typical of intermediate-term market lows over the past few years, which suggests a very oversold market. On the way to that level, however, we've seen an expansion in the number of NYSE, ASE, and NASDAQ stocks making fresh 65-day lows (middle chart) and a breakdown in the advance-decline line specific to NYSE common stocks (bottom chart; credit to Decision Point). The cumulative NYSE TICK, as well, has been making fresh lows, indicating that--thus far--lower prices have not been attracting the interest of institutional buyers.
My recent look at the market's technical strength found that the weakness has affected most of the major sectors. Only 17% of S&P 500 Index ($SPX) stocks are trading above their 50-day moving averages; that number is only 13% for NASDAQ 100 Index ($NDX) issues and 3% for Dow Industrials ($DJI) shares. Small caps have been stronger, with 22% of S&P 600 Index ($SML) stocks above their 50-day benchmarks.
Among NYSE common stocks, we had 24 stocks making 52-week new highs on Friday against 289 lows. That compares to over 300 new lows at the March bottom and over 700 at the January bottom. Large cap issues--particularly in the Dow--are much weaker now than at those two prior junctures, but we've seen some residual strength among small cap and midcap shares. For example, we had only 52 new annual lows among S&P 400 midcap stocks ($MID) and 65 among S&P 600 small caps. Both those numbers are well below their January and March peaks.
The bottom line is that we are at oversold levels that historically have led to intermediate-term bottoms, but we're not yet seeing signs of buyer interest in stocks. To the contrary, we've seen a steady weakening of the market indicators. As long as that's the case, it's been dangerous to try to catch the market's falling knives.
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