Tuesday, May 12, 2009

Indicator Update for May 12th

Last week's indicator review found that "As long as we continue to see an expanding number of stocks making new highs and more stocks trading on upticks than downticks--moving the Cumulative TICK higher--pullbacks should be relatively short and shallow. That has so far proven to be the case, as the above charts updated as of Monday's close suggest.

Demand has continued to exceed Supply overall (top chart), meaning that we're seeing sustained upside momentum (more stocks closing above the volatility envelopes surrounding their moving averages than closing below them). The number of NYSE, NASDAQ, and ASE stocks registering fresh 65-day highs also hit a new high for the bull move this past week (middle chart), suggesting that the rally has retained a relatively broad base. That is also supported by the strength we've seen across the S&P 500 sectors and by a new high in the advance-decline line specific to NYSE common stocks.

Finally, buying sentiment has continued to dominate the market picture, as the Cumulative NYSE TICK (bottom chart) indicates. Until we see some weakness in the new high/low data (a rise in 20-day lows, for example) and Cumulative TICK, it will continue to pay to treat market declines as relatively short and shallow. I will be updating the new highs and lows, as well as Demand and Supply, each morning prior to the market open via Twitter (follow the tweets here) and will be looking specifically for evidence that we might get the long-awaited correction.