If you would like an email sent to you when I update the blog please send an email with "subscribe" in the subject line to traderbob58@gmail.com. To be removed use "unsubscribe".

Search This Blog or Web

Thursday, June 7, 2012

What is breadth saying

Looking over the breadth data we have some positive developments.  Check out the daily chart with the 10 DMA advancing/declining data along with the McClellan (MCO) oscillator.

The 10 DMA data shows positive crossovers for both breadth and volume.  The MCO has reached the over bought territory and is also showing strength.  There was a significant divergence into the low indicating  people have been buying this dip.  Lets look at some similar setups to see what happened.

Last summer we had a similar setup at the 200 SMA that led to a sharp bounce after one last down move.
That rally eventually failed and we went to lower lows.   Here is another chart.

This chart was from 2005, and also made a nice bounce after one last pullback.  This low was not broken for a long time.

This one is from 2004.  In this instance there was not much of a pullback before going higher.  The rally did not last all that long before the low was broken.

Breadth would seem to be indicating relatively good odds of a bounce higher from here over the next couple of weeks.  In two of the three instances above, the market was lower a few weeks later so this is not an indication of a long term bottom.


No comments:


The information in this blog is provided for educational purposes only and is not to be construed as investment advice.