Tuesday, September 02, 2008

Indicator Review for September 2nd

Last week's indicator review found a stalling out of the market bounce since mid-July, with fewer stocks registering fresh new highs and only modest advance-decline strength among NYSE common stocks. Recent sector behavior has shown signs of rotation, rather than trending, which is consistent with continued weak money flow readings. As a result, the new high/low balance (middle chart) remains stagnant, even as we returned to relatively overbought levels (top chart) before falling back on Friday. The advance-decline line (bottom chart; kudos to Decision Point) tried breaking to the upside midweek, but fell back into its multi-week range with Friday's drop.

With falling commodities and a strong U.S. dollar, stocks are finding some support; U.S. equities have been relatively strong compared with many global counterparts, particularly in Asia. Still, the weak money flow, lack of consistent trending across sectors, and modest new high/low strength have me questioning the upside, particularly if we make new price highs without meaningfully expanding those indicators.