As regular readers know, I runway a proprietary indicator called Demand in addition to Supply every bit indicators of upside in addition to downside momentum. These numbers are posted each morn earlier the marketplace opened upwardly via Twitter (follow here). Demand is an index of the number of NYSE, NASDAQ, in addition to ASE issues that closed inward a higher house the volatility envelopes surrounding their short-term moving averages. Supply is an index of issues closing below those envelopes.
For the past times 2 trading days, Demand has finished the 24-hour interval strong, indicating ongoing rigid upside momentum amidst stocks. I went dorsum to belatedly 2002, when I kickoff began collecting these data, in addition to examined what has typically occurred inward the S&P 500 Index (SPY) later 2 consecutive days of readings inward a higher house 130. As a betoken of reference, the hateful daily value for Supply over that menstruation has been 644; the criterion divergence has been 405. That way that a reading of 130 is to a greater extent than than 1.5 criterion deviations inward a higher house average--a rigid reading.
Interestingly, this combination of rigid days has solely occurred on eighteen occasions since belatedly 2002. Over the side past times side 5 days next this strength, SPY finished downwards past times an average of -1.25% (6 up, 12 down). Indeed, from 1-5 days out, at that topographic point was no bullish bias inward the data. While this is a modest sample, it suggests that assuming a continuing of short-term forcefulness next high momentum is a mistake. It is mutual for markets to recess in addition to right later a ascent tide has lifted boats for 2 forthwith days.
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