Monday, June 09, 2008

Indicator Review for June 9th

Last week's indicator review emphasized a lack of buyer interest manifesting itself across a variety of measures. Particularly noteworthy were weakness in money flows and in the Cumulative NYSE TICK. That lack of interest translated into further price weakness this past week, as the S&P 500 Index ($SPX) moved to multi-week lows.

On Friday, we had 402 new 65-day highs across all NYSE, NASDAQ, and ASE issues against 360 new lows (top chart). The latter is the highest level of new lows since mid-April. A similar picture can be seen among fresh 20-day lows across the exchanges. Friday recorded 642 new 20-day highs against 1242 new lows. That is the highest level of new 20-day lows since March 20th.

This weakness has hit a majority of stock market sectors. Only the energy sector of the S&P 500 Index continues to register positive values in my Technical Strength index of trending. Among the 40 stocks in my basket, evenly drawn from eight S&P 500 sectors, we have as of Friday 7 stocks in uptrends, 4 neutral, and 29 in downtrends. Only 43% of S&P 500 stocks are now trading above their 50-day moving averages, down from 80% at the market peak. Only 29% of those stocks are now trading above their 20-day moving averages.

Despite this weakness, we are not yet recording significant oversold levels in my Cumulative Demand-Supply Index (middle chart), though the index has been deteriorating for a while. Readings below -20 have tended to accompany good intermediate-term buying opportunities; the current reading is -4.69.

Money flows for the Dow 30 industrial stocks (bottom chart) remain negative, with the four-day average continuing below the zero line. That means that more dollars are flowing out of those stocks than coming in. Interestingly, money flows during the last few days of weakness have not been as negative as seen a couple of weeks ago, but this will only be an important factor for stocks if we start to see divergences in other measures, such as the new highs/lows.

In all, there's not much to be excited about for the bulls. A look at the sectors shows fresh bear market lows for banking stocks and homebuilder shares. These sectors are the equivalent of the tech stocks during the 2000-2003 downturn; it is difficult to imagine a sustained bull market with these leading the downside.


Review of Sector Performance