Monday, December 29, 2008

Indicator Update for December 29th




Last week's indicator review found that we remain in a multi-week range bound market: "We continue to trade within a broad range, frustrating bulls and bears alike; ultimately, I expect any continued inability of stocks to sustain a move above the 900 area resistance to lead to a test of the range lows." We did indeed see a move down to the middle of our recent range, but seasonal strength kept the markets off its range lows. Sector strength has weakened over the past week, but money flow was positive among Dow stocks and the Cumulative Adjusted NYSE TICK managed to hit another multi-week high (bottom chart). The latter has reflected relative strength among small caps; as I noted in the morning's Twitter update, 47% of S&P 500 stocks closed on Friday above their 20-day moving averages, but 63% of small caps.

Thus, while we've pulled back to a moderately overbought stance in the Cumulative Demand/Supply Index (top chart) and have also pulled back in the ratio of new 20-day highs to lows among NYSE issues (middle chart), these moves were muted. The low 900 area continues to serve as important resistance for the S&P 500 Index; a break above that level accompanied by strong sector participation and new high strength would be an important signal for longer-term bulls. We need to see new 20-day lows outnumbering new highs and a downturn in NYSE TICK and money flow to test range lows. I will be updating market indicators each morning prior to the NY stock market open via Twitter (free subscription).
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2 comments:

Charles said...

Hey Doc, I've noticed you(and it seems, alot of other "veteran" traders) prefer to trade futures. Why? Is there an advantage over shares? Thanks and Happy Holidays to you and yours. --CU

Brett Steenbarger, Ph.D. said...

Hi Charles,

I do trade ETFs; I find futures markets helpful for volume analysis. The 24 hour trading and leverage with futures, especially in the prop world, are advantages--

Brett