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Tuesday, November 6, 2012 - Short Term Update

|Includes:DIA, FXE, IEF, QQQ, SPDR S&P 500 Trust ETF (SPY), TLT, UUP

Bottom Line:

For the last few days the market has been attempting to go higher. That said, the market seems to be doing so with little bullish momentum. The indicators I watched have gone from very oversold to neutral without price moving much. And when the indicators move, and the market doesn't, you're on the wrong side. The market needs to clear 1435 to keep the rally alive.

Price Action:

SPX - Short Term:

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Notes: The SPX was stopped here last week, so clearing this resistance would be a good sign. Some indexes such as the SOX, the BKX, the CYC have already cleared this hurtle while other indexes such as the Nasdaq are badly lagging. If the SPX goes below 1423, and I'm getting out of the way again.

Dow Industrial:

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Notes: As I mentioned, we're almost back to overbought and the market hasn't done much. That's not a good sign. A continued failure to rally and subsequent break of current support and there isn't much support confluence till 12,400, almost a thousand Dow points lower.

Dow Transport Index:

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Notes: The good news (for bulls) is that the transport index has already exceed the 11/2 highs, the bad news is that not by much, short term momentum is overbought, and the transport is starting to run into overhead resistance.

Indicator Summary:

  • Bullish: 40%
  • Neutral: 50%
  • Bearish: 10%
  • Aggregate Interpretation: The cumulative picture still slightly favors a continued rally. Thus far however I've been disappointed with the lack of urgency from the bulls.

Indicator Snap Shot:

Percentage of Stocks Above their 20 DMA:

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Notes: Still a bullish chart...

NYSE McClellan Oscillator:

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Notes: Probably one of the more bullish charts, this looks like a basing pattern after touching oversold.

NYSE New Highs - New Lows:

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Notes: Still advancing from oversold.

NYSE Advance - Decline Line:

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Notes: Recovered from oversold and back to neutral.

NYSE Up - Down Volume:

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Notes: Another neutral reading.

NYSE TICK:

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Notes: Neutral.

NYSE TRIN:

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Notes: The TRIN has from one of the more oversold readings to nearly overbought, with little recovery in stocks. This is a definite change of character in the market since when then market got even a little bit oversold, stocks rallied sharply (in the last few weeks and months). Also note that while not "oversold," the TRIN is at levels where it reversed at the previous two pivots.

Other Notable Notables:

  • As I mentioned in yesterday's update, how the market takes the election results tends to dictate the direction of the market for the next several days, and up until two weeks. So if you're a bull, you'll want to see a positive reaction tomorrow and vice versa.

Summary:

To summarize, the market should be rallying, it's not, more like barley hovering. I'm a mild bull here but if we see a down market tomorrow, I think there's a good chance the bounce gets erased.

-Bill L.

Disclosure: I am long SPXL.

Stocks: SPY, DIA, QQQ, TLT, IEF, FXE, UUP