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Thursday, August 16, 2012

A peek at some market internals

Lets start with one of the better indicators, the cumulative volume index.

Upside volume is clearly lagging.  Not only is this indicator divergent with the April high, it is even divergent with the early July high.  It is not infallible though.  Here is a look at 2006.

As SPX was testing its May high in Sept. the indicator was way behind its May high.  However, starting in Aug. as the market started picking up steam the indicator did keep pace within its uptrend.  That is not happening now with the July-Aug. divergence we currently have.

Here is the number of stocks above their 200 SMA.

It is pretty normal for this one to have significant divergences from the prior high when a dip takes it down as low as it did this time.  However, it is not really keeping pace very well with price since early July.

Here is a look at it from 2006.

We can see the divergence with the May high.  However, as the rally progressed through late July and Aug. the indicator showed a little more enthusiasm and was making new highs when price was making new highs.

Here is the Summation index.

This one is not keeping pace very well with price either.

A look from 2006 shows a much stronger pattern.

The next indicator is the number of stocks above their 40 MA.

This indicator still has not reached the strength seen after the Oct. low last year.  It has clearly diverged since early July.  It is also pretty close to rolling over here.  This one diverges from price a lot more often then most so it is not a great indicator on its own.  It does provide early warning sometimes like the divergence at the June low.

Finally, here is the chart of the NYSE bullish percent indicator.

This indicator has kept pace with the rally unlike some of the others.  It is quite divergent from the April high, but this one is usually like that.

Here is a look at it from 2006.

As SPX was testing its May high in Sept. this indicator looks pretty similar to today.  The current divergence is only important if the retest fails here.

I used 2006 as a comparison because of the similarity in the magnitude of the sell off.  We can see some similarities and some differences in these indicators to the rally off that low.  I would classify the divergences in some of the internals as yellow flags only.  If price keeps going up the divergences will disappear.  I would say the cumulative volume index and the summation index are red flags as they are not acting right even within the rally.  I think the economically sensitive indexes I posted about in http://traderbob58.blogspot.com/2012/08/what-markets-are-saying-about-economy.html are all red flags and may be more important then the market internals.


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