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Wednesday, May 1, 2013

Some market internals

I thought I would take a look at some of the market internals and see what is happening under the covers.  First up is the put/call ratio.

The VIX is the black line in the main part of the chart and we can see a series of higher lows.  SPX has been getting a bit more volatile lately so that makes sense.  SPX can go up along with the VIX it just would mean it will likely be making bigger swings.  The 10 and 20 DMAs of the put/call ratio have not clearly turned down yet.  Bulls will want to see a cross of the 10 DMA below the 20 soon to confirm the rally.  This is a rather elevated level for these MAs with price at new highs.  I would think that means there is considerable hedging going on.  That could be upside fuel if the market continues up.  It could always be smart money betting on a decline which could fuel the down side also.  This would seem to be a possible indication of a big move one way or the other.

Next up is the number of stocks above their 50 SMA.

This index is not in overbought territory yet.  It is obviously divergent from the levels seen earlier in the year.  It has shown some strength though on this rally.  This is one of those positions where it is giving a warning sign if the market rolls over, but has more room to go if the market continues up before becoming over bought.   This seems similar to the put/call ratio indicating there could be a big move coming.  The direction of the move is yet to be determined.

Here is a look at the bullish percent indicator.

Unlike the other indicators the bullish percent indicator is not showing the same strength yet.  It has turned up slightly, but has more work to do to confirm the bullishness.  It still looks an awful lot like last spring before the correction started.  This one still looks potentially bearish here, but continued strength could change that.

The internals seem to be saying a big move is possible.  That makes sense here I think.  If SPX gets above 1600 and stays there it stands to reason there could be people chasing it higher.  If we turn down from multiple tops with poor economic data and poor earnings reports there could be significant selling.  This is do or die time for the bulls.  We should know pretty soon.


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