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Friday, May 29, 2020

Short term overbought 5/29

SPX tested the 200 DMA from above today and bounced into the close.

Despite the positive close for SPX and most indexes, the breadth was negative.  The volume was very big today.  The downside volume was nearly twice the upside volume which is odd on a positive day.  SPX has cleared all the moving averages that I look at on weekly and monthly as well as daily. 

The futures keep bouncing off the 20 SMA.

Both the green line and the short term indicator are in overbought territory.

The medium term is also overbought.

About 44% of SPX stocks have climbed above their 200 DMAs.  That contrasts sharply with the number of NYSE stocks above their 200s as the next chart shows.

The average stock probably had more downside so there is more to make up.  The market is not completely put back together yet. 

The market ended May on a high note.  The big cap stocks have led this rally from the beginning.  What is unusual is that the first leg of a bull market coming out of a recession is always led by cyclical stocks rather than growth stocks.  That action is a clear sign the recession is coming to an end.  We do not have that this time.  It is still not clear exactly how the economy is going to do over the next 6 months.  The virus data showed a new high in the number of world cases yesterday.   It seems pretty clear we are not going to be back to normal in the next few months.  However, it is not clear exactly how the market is going to react to that.  Until something changes that causes some real selling pressure the bulls will stay in charge.

Have a great weekend.  Peace and good health to all.


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