Thursday, November 13, 2008

Tracking The Recent Stock Market Weakness

As the helpful chart from Decision Point illustrates, we're testing the October lows in the NYSE Composite Index (top pane), but we're already making fresh bear lows on the advance-decline line specific to NYSE common stocks only (bottom pane). Meanwhile, we had 1208 stocks make fresh 65-day lows across the NYSE, NASDAQ, and ASE, which is only about half the number that we saw in late October and less than a fifth of the number we saw during the second week of October.

With Wednesday's broad decline (declining stocks led advancing issues by over 2600 issues on the NYSE), the forty stocks in my basket (five highly weighted issues from each of eight S&P 500 sectors) have turned distinctly bearish. Only one stock is showing a neutral short-term trending mode on my Technical Strength measure; the remaining 39 are in downtrends.

While the non-confirmations to date from the new highs/lows and Cumulative NYSE TICK are enticing for bottom-fishers, the weakness among the S&P 500 sectors and the advance-decline line show us in a strong short-term downtrend. We've had some sharp upward bounces during the trading days this week, but the buying interest has not been sustained. We now need to see selling interest and momentum dry up at the range lows if this is indeed to be part of a bottoming process. To date, that drying up has not occurred.