Monday, August 25, 2008

Indicator Update for August 25th

We saw weakness early in the week and a bounce at the end, but stocks overall have fallen from their moderately overbought levels (top chart) and have stalled out in terms of new 65-day highs versus lows (middle chart). Even after Friday's bounce, we only had about 400 stocks making fresh 20-day highs against a similar number of new 20-day lows. By contrast, we had over 2000 new 20-day highs on August 11th. We see how the broad NYSE market has been range bound since the bounce from the mid-July lows (bottom chart; credit to Decision Point), with only tepid strength in the advance-decline line specific to NYSE common stocks.

This fits with the money flow and sector data that I recently posted, indicating that fresh funds have not been flowing into stocks. Nothing has changed from my last update, suggesting that what we've been seeing has been a bounce in a bear market, not the start of a fresh bull leg. I will be watching the indicators closely for possible divergences on any tests of the recent market highs.