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Friday, August 24, 2012

Market internals

It is time to take a gander at some market internals.  Lets start with new highs.

Yes, you see that correctly.  We went from over 300 to under 50 in two days.  It took seven days from the top back in 2007 before that happened.  That is not the institutions taking their foot off the gas, that is applying the brakes.

Here is the NYSE bullish percent indicator chart.

There was a considerable divergence at the highs.  However, as I have written before that is not all that unusual.  What will matter is whether this indicator turns back down or not.  We will just have to see how it behaves going forward.

Next is the put/call ratio.

This is the 10 and 21 day MAs, not the raw data which is pretty noisy.  We can see the 10 day MA got down to the lowest level of the year.  It is showing a considerable amount of optimism in the market.

This next one I have not shown before.  It is the advance/decline line for the NASDAQ 100 index.

This one is oddly very divergent from its index.  That was not the case back at the 2000 or the 2007 tops.  I believe this is telling us that AAPL is what is holding the index up.  Apparently most of the stocks in the index are not keeping pace.  The last time it was divergent like this was going into the May high in 2006.  That was a sizable pullback, but not the end of that bull market.

This next one is the number of stocks above their 200 SMAs.

This one was also clearly divergent with the April high.  It will take a few days to confirm a sell signal though from this position.

The cumulative volume index is next.

This one is glaringly divergent with the April high and even within this rally.  This one was a red flag all the way to the new high.  Here is what it looked like at the 2007 top.

The last one is the number of stocks above their 40 SMA.

The last leg up did not garner any support from this indicator.  It never got up to the strength we saw last Oct. coming off that low either.

We can see we had considerable optimism along with many internal divergences into this retest.  The cumulative volume index is really a red flag.  I would say the sudden drop in new highs right after making a new bull market high is very unusual.  We will have to see how the new highs behave in the days ahead.  It will take a few more days for these internal indicators to confirm sell signals. 


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