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Wednesday, August 8, 2012 - Short Term Update

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

Bottom line:

The indicators that I follow have elevated from a "neutral" reading to a "neutral-bearish" reading, indicating caution, while not being outright bearish. The divergences in the transport index and copper continue, while the picture and treasury yields is a bit more muddled.

Indicators:

  • Bullish: 1/20
  • Neutral:9/20
  • Bearish: 10/20

Indicator Summary: The market is bouncing from the oversold reading I flagged on July 24. As it stands today, the best interpretation is that the market is lightly overbought, though there appears to be a bit more room to run. If I had to put a number on it, I would say the current rally leg is about 75% complete.

Examples:

Percentage of stocks above their 20 DMA:

Notes: Edging towards overbought territory, but not quite there yet.

NYSE Mcclellan Oscillator:

Notes: Similar story... The best interpretation is neutral, with room to run higher.

NYSE Advance Decline Oscillator:

Notes: Elevated, but nothing to get excited about yet.

NYSE Up-Down Volume Oscillator:

Notes: Neutral.

NYSE TICK:

Notes: Near overbought.

NYSE TRIN:

Notes: While this doesn't look overbought yet, it should get overbought tomorrow as the extreme August 2nd reading drops off.

The "NewHigh-NewLows" indicators are still showing divergences, which typically precede turns.

NYSE NewHighs-NewLows:

Notes: Coming off overbought with a bearish divergence.

Amex NewHighs-NewLows:

Notes: Just below overbought, but I grade this as "bearish" due to the bearish divergence.

Update:

The Dow Theory non-confirmation remains:

Dow Industrials:

vs.

Dow Transports:

vs.

Dr. Copper:

vs.

10 Year Yields:

Notes: Back near the recent highs of the previous range, though this certainly does not look like the rally in equities.

Summary:

Many of the non-confirmations remain, while the leading index (utilities) is losing steam. The indicators I follow aren't quite at a place where I would recommend an all out short position, but we appear to be getting there. If they all line up, I'll note it here.

Talk again soon,

-Bill L.

PS - Sorry about the short update, I've begun preparing for the CMT lvl 3 exam, I'll continue to put out notes as my schedule allows. While I may not be able to write daily, whenever a high degree of indicators line up and I'm looking to initiate a trade, I'll certainly update the blog.

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