Monday, May 04, 2009

Indicator Update for May 4th

Last week's indicator review found that, while there was some narrowing of strength among the indicators, there was also continued strength in participation and buying sentiment--not something normally found at market tops. This past week added to that strength, as Demand (stocks closing above their short-term volatility envelopes) continued to exceed Supply (top chart) and the number of stocks making fresh 65-day highs expanded to a fresh bull swing peak (second chart from top).

The NYSE Cumulative TICK also moved to a new high for this bull swing (second chart from bottom), as did the Advance-Decline line for NYSE common stocks (bottom chart from Decision Point). This is consistent with the strength we've been seeing among the SPX sectors.

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. I will be tracking many of these indicators daily before the market open via Twitter (free subscription via RSS), including Demand/Supply; new highs/lows; and the trend behavior of stocks.

One particular indicator that I will be watching carefully is the number of stocks registering fresh 20-day lows; this often expands ahead of meaningful stock market corrections. At 274 on Friday, it is higher than levels from early April, but well below the over 2000 fresh 20-day highs during the week.