Wednesday Market Momentum Breadth Volume
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Last week we said that in order for this equity rally to succeed we need new lows to settle down to restrained levels such as 40 to 50 per day. Well the market has rallied while new lows have declined. But this level of new lows is probably still a bit too high for this to be the beginning of an intermediate-term rally. These new lows seem more likely to be a level indicating that this is a bounce within the range of a sideways channel with a lot of churning taking place.
This chart above looks better to me than the chart of new lows. The NASDAQ issued a decent signal today with a SAR buy on the summation index while the MACD histogram of the summation index remained on its buy signal from early December. The NASDAQ index is now up against short-term resistance so it could give back some gains for a few days. But I like the looks of this move for the summation index as it retested and then broke out higher from a low, oversold level while the histogram remained on a buy.
Move evidence above that we may see the market give back a bit short-term since the McClellan is now overbought. If this short-term indicator can hold at around the zero level as the market corrects it will be a positive for higher prices going forward.
These two charts above attempt to calculate intermediate-term market momentem by showing the distance of the stock indexes above the 40-week moving average. Notice how the NASDAQ starting finding support at the zero level last fall and held this level despite the horrendous market selloffs this fall. This has to be considered a positive going forward as the NASDAQ corrected but retained its upward momentum. If the market continues to correct and hold these levels, I think the stage will be set for another sustained intermediate-term uptrend in this aging bull market.
