Expect More Pullback Before Rally Continues

We said on Friday, "We'll show this weekend why we expect a more significant pullback soon." The weekend was hectic, so here are the updated indicators, with Monday's action included:

This daily SPX chart shows that Monday was the first 9-to-1 volume down day since the rally started, following several 9-to-1 volume up days:

Here's the weekly SPX chart, showing a bullish divergence with PPO, which last week had a bullish cross buy signal:


The SPX has broken out from its weekly downtrend, and is now backtesting that trend line.


On the hourly chart, the SPX broke down from its channel today after several bearish divergences during the rally:

This chart of the Tick 10-day EMA readings shows that this selloff has already relieved the overextended condition of this indicator, though it can go much lower:



The updated $CPC Put/Call ratio (10-day EMA) chart shows this EMA has come well off its lows, but is still relatively low:



The updated NYMO chart shows that the overextended condition of this indicator has also been relieved, but it can go much lower:



The Nasdaq/SPX ratio remains at a new high level, whereas its been at a low at previous market lows, but that divergence probably has more to do with the fact that bank stocks have been clobbered (and replaced Nasdaq stocks as the speculative trading stocks of choice), and there are far more bank stocks in the SPX than Nasdaq:



Finally, here's the updated NYSE Summation Index (cumulative NYMO) chart:


NYSI has reached the level of last summer, but still is well below the level reached at the beginning of January.

Overall, the market is likely to pull back/consolidate some more before resuming the rally. We'll watch the nature of this pullback/consolidation to determine when/how much to increase long exposure, or whether to reshort first.

There have been some wild intraday swings recently, sometimes several percentage points in both directions multiple times. These conditions have made it very difficult to trade without closing out and opening positions intraday. We were hoping to only do posts after the close, but as conditions warrant, we'll continue to post intraday updates as well.

Comments

[Mad Hedge F...:]

The market is full of anomalies. 27 out of the 30 Dow stocks are currently profitable. The public perception is that all are losing money, and several are on the verge of bankruptcy.

Mar 31 12:33 PM

[R. Ennis:]

MHFT

Great point, not to mention there is still a lot of bearish sentiment...nobody believes we can go higher, so we very well could.

regards,
r


On Mar 31 12:33 PM Mad Hedge Fund Trader wrote:

> The market is full of anomalies. 27 out of the 30 Dow stocks are
> currently profitable. The public perception is that all are losing
> money, and several are on the verge of bankruptcy.

Mar 31 12:44 PM

[Obi-Wan:]

Q1 earnings will dictate whether the rally has legs.....

Apr 01 08:41 AM