Monday, October 26, 2009

Indicator Update for October 26th

Last week's indicator review found signs of weakening readings following a momentum peak in September. We did pull back in trading during the past week, putting most sectors in a rangebound mode. That moved us to a moderately oversold level in the Cumulative Demand/Supply Index (top chart), as stocks making new 20-day lows equaled those making new highs (bottom chart). Thus far, we continue to see the market indicators pull back at successively higher price lows; that is sustaining the longer-term uptrend. There is nothing in the current action thus far to change that pattern. Should we reach the oversold levels in the Cumulative DSI that have corresponded to intermediate-term lows in the recent past and sustain higher price lows (as well as higher new high/low readings), I would be a buyer for the next bull leg. Violation of those levels would have me viewing recent consolidation as a potentially more extended interruption of the bull market.