Wednesday Market Momentum Breadth Volume
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I'm playing catch up with these posts. The Tuesday comments were published a couple hours ago.
This is very encouraging. For weeks and weeks, after logging in to see the market action an hour into the day there would be hundreds of new lows on both exchanges. It didn't matter whether the market indexes were up or down. The new lows were broadcasting for anyone who wanted to see that a huge number of shares were being sold by institutions. But now we have a couple days where the new lows are contained. Too soon to make too much of it, but this is a good sign because it is a critical ingredient in order for the market to right itself.
The advance /declines have never been my favorite indicator, but still they are worth monitoring for the subtle signs of the market. This chart is encouraging also. These moving averages never dipped below the August 2007 lows and haven't confirmed to the downside. So this is a postive divergence.
I've shown this longer-term chart a couple times before. The cumulative AD line broke below the moving average giving a good signal of the downturn we've experienced. We should have paid more attention to it. But notice how well it confirmed the bull market and how it showed the broad participation of stocks. Contrast it to the very weak participation near the end of the prior bull market. I believe the weakness in the AD line 8 years ago hinted at how deep the price correction would be once stocks finally rolled over. So the strength of the current AD may be indicating that prices don't have the far to fall this time.
