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, December 15, 2016

Daily update 12/15 Intersting articles on the R2000 and Value line geometic indexes.

As usual the market retraced yesterday's post FED move.

However, once the move was retraced the market ran into sellers.  Today's low came in the afternoon.  Breadth was +54% after peaking at +62% mid day.  New highs came in at 113.  New lows were elevated again at 111.  Bond funds making new lows again.  This was a pretty weak looking bounce.

The 20 SMA has caught up to price.  This is where it usually slaps price higher or the futures break below it and initiate a pullback.

Despite today's bounce the green count slipped some more.

The short term lines continued to get closer together in the bull pressure chart.  It is really the long term lines that should be worrying to bulls.  Both the summer rally and the post election move do not have the buying power seen in the rallies from Oct. 2015 and Feb.  In less days then the current rally both of those moves moved up the long tern green line by 16 percentage points.  The summer rally peaked at 9 and this rally at 8 percentage points.  The breadth has been good on this rally.  The NYSE advance/decline lines (both the common stock only and the regular version) have made new highs confirming the indexes.  All major indexes have broken out.  However, the bull pressure chart is clearly showing a lack of enthusiasm.  The volume is weak.  Lets take a look at the two times in this bull market that are somewhat similar starting with 2015.

The white line in the bottom panel is the current peak.  As you can see the green line barely got over that line starting in the spring of 2015.  Over the summer it got even weaker before the rapid fall in Aug.  The market was running out of stream.   Now for a look at 2011.

In the spring of 2011 the long term line again had trouble getting above the white line.  Over the summer the sellers took hold before the big fall.  Also notice the move up off the Oct. low that year.  In 12 days off that low the green line moved up 14 percentage points.  That was much different then what we are seeing now.  We are already 28 days into this rally and nowhere near that kind of move up.  Whether we are in for a big fall I can't say, but we clearly do not have nearly as much buying pressure as we have seen in prior rallies in this bull market.

We may have a shortage of buying pressure, but we clearly have no shortage of bullish sentiment.  I heard Bob Pisani say the other day that retail brokerage accounts reported big surges (30% or more) in trading activity in Nov.  The retail investor is diving head long into the bull market.  I think this is exactly what my bull pressure indicator is showing.  It is not the big boys piling into this market.  It is individual investors.  Have they come too late to the party?  While on the surface it looks like the clouds have cleared and there is nothing but blue skies and clear sailing on the upside.  I am just not sure that is true.

Interesting look at the Value line geometric index at a key inflection point.  Forget 20K – THIS Is The Stock Market Level To Watch  That article contains this interesting chart.

Jeff Cooper calls a chart like this a rule of four break out.  Essentially this chart is setup for a big move.  Breaking out over a triple top usually leads to big moves to the upside if the break out succeeds.  A big move to the downside usually occurs if such a break out fails.  This looks like a key moment in time.  Will the break out succeed or fail?

Must read article if you are invested in the R2000 index.  Banks in Drag : The Russell 2000 Exposed


No comments:


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