Monday, April 27, 2009

Indicator Update for April 27th

Last week's indicator review found few divergences that would suggest a significant retracement. We did see weakness early in the week, only to once again see stocks challenge their bull market highs, with several indexes hitting fresh peaks. As noted in the recent sector review, the bull move has been occurring on a narrowing base, suggesting that we may be more vulnerable to a correction than in the past several weeks. The Cumulative Demand/Supply Index (top chart) has been making lower highs lately, suggesting a loss of momentum among the broad list of NYSE, NASDAQ, and ASE stocks. Similarly, this past week's late strength saw a reduced number of shares making fresh 20-day highs vs. lows (middle chart), again suggesting a narrowing of participation in the strength.

That having been said, we continue to bolt higher in the Cumulative TICK (bottom chart), as well as the advance-decline line specific to NYSE common stocks. We're also seeing smaller cap issues holding their own versus large caps, with smaller issues within the S&P 500 Index also outperforming their megacap counterparts. This continued strength in buying/speculative sentiment is not what we normally observe at major market tops, suggesting to me that any near-term correction that we see may be part of a more extended topping or consolidation, rather than the start of a fresh bear market.

As always, I will be updating the indicators each morning before the market open via Twitter. Tweets can be accessed from RSS subscription or from my Twitter page; the five most recent tweets appear on the blog page under "Twitter Trader". Have a great week trading.