Wednesday Market Momentum Breadth Volume
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This was a much better day in the market after 6 bad days in a row. Finally, the bullish percents stopped ticking lower for the two major exchanges. The NASDAQ bp dipped below the 50% level, and the NYSE bp is now in a column of O's in a downtrend so some important technical damage was done. So the question now is whether Friday and early Monday were wash outs working off a very overbought market that will allow the uptrend to resume?
The chart above shows there was some improvement in the new highs /new lows to back up the rise in stock prices. The NASDAQ net was still more for the new lows than new highs, but it still marks a major improvement over yesterday's net and stopped 7 days in a row of net declines. In a strong market, even when the uptrend is correcting the net new highs should still be reasonably healthy, just as volume should decline during the correction.
Some people have offered a good suggestion to include the advance /declines in the breadth analysis. Including the AD is a good suggestion because it offered valuable signals in both August and last week. The AD improved nicely today for both the NYSE and NASDAQ which confirms some of the snap shown in the BP and HL charts.
Today was a good day in the market, and I don't know about you but I'm feeling better. But before getting carried away we should put all the pieces together.
Last Friday we noted that the newsletter sentiment was so bullish that the sentiment reading was outright bearish.
Saturday showed many of the major bullish percents shifting to downtrends, and there were more shifts to downtrends on Monday.
On Monday morning we noted that a number of the major indexes shifted back below the 40-week moving averages indicating that the weak indexes were negatively diverging from the strong indexes.
Monday night we noted that the bond market yield curve had shifted dramatically lower in one week indicating that bond investors were seeing a significant problem.
The final kicker was that the new lows were way above where they should be in an uptrend showing considerable levels of stock distribution taking place in the market.
In my opinion, these signals indicated that it was time to start raising cash. We'll need more than one day to be convinced to start putting money to work again, but today was a good start.
