Lack of Selling Pressure a Positive Signal

Last week we reviewed the latest position of Lowry Research on the stock market: Turbulence Ahead, Uptrend Intact. One of the major reasons that Lowry’s continues to believe in the health of the market and a continuation of the uptrend is the lack of selling pressure.

Lowry measures this through their proprietary metric called (what else?) Selling Pressure. It remains low and falling, helping to support the thesis of a healthy market rally. According to Paul Desmond: “Every major market top in Lowry’s 76-year history has been preceded by a sustained rise in selling pressure. With selling pressure recording a new 12-month low within the past two weeks, no such rise is now evident.”

This has got to be frustrating for the bears. But it is also unbelievable to the large number of participants in the market who continue to look at the current price levels as a mirage. The US retail investor is not venturing out into equities, even after watching the stock market climb a wall of worry inch by inch.

This has been and continues to be the most hated stock market rally that I’ve ever witnessed. In any case, it is comforting to confirm Lowry’s proprietary measure of selling pressure with a similar measure from InvesTech.

Click chart to see larger version:

Source: InvesTech

Jim Stack, the writer of InvesTech has a handy checklist for new bull market conditions. One of them is this metric. And along with the rest of the list, it has been flashing a bright green buy signal for a few months.

As well, the month of November has been historically one of the best months for the S&P 500 since 1950. I’m not sure that another 20% rally by year end will convince the retail investors to risk their money in the stock market again. But we may just see that.

Comments

[tunaman4u2:]

This market has had extensive selling in the futures saved by manipulated data & stick saves...
Hard to fight GS computers making profit in all but 1 day over an extended period of time.

Just call it what it is... a Fed induced bull market that will end when the Fed ends it.

Nov 04 01:02 PM

[User 493702:]

Who has any stock to sell? GS owns it all. Or Obama's stock Mafia.

Nov 04 01:11 PM

[Nathaniel C:]

I have to disagree about the lack of selling pressure. Whenever the market falls the volume has been a lot higher than on up days. Last week was a great example. It does seem that there is a lack of follow through on the part of the sellers.

Nov 04 01:41 PM

[bartpr:]

the stocks advancing in the last upmove have been dismal. we are in some kind of correction that is too early to define.

Nov 04 01:54 PM

[TradingHelp...:]

Great article and comments thereafter. I learn something everytime I visit this site.

Nov 04 01:56 PM

[Roger Knights:]

It sure looks like the market internals have been sputtering lately. Maybe, if there's no "selling pressure," the market will just go sideways--or at least make no dramatic moves in either direction?

Nov 04 04:22 PM