Wednesday, August 8, 2012 - Short Term Update
Seeking Alpha Analyst Since 2009
"There is only one side to the stock market; and it is not the bull side or the bear side, but the right side." - Jesse Livermore
Nutshell: Currently employed by a global stock exchange. Some of the largest global banks before that. MBA. CMT III candidate (all exams passed). 40% lifetime annualized return. Specialize in analytics and risk management.
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.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.