Info!! Divergences Inwards Coin Flows

question the deport market's viability dorsum inward March was the difference inward coin flows for the Dow as well as S&P stocks relative to January. Although nosotros saw fresh cost lows inward March, higher lows inward coin flows suggested that selling was drying up. These divergences were confirmed past times the fewer stocks making 52-week lows inward March relative to Jan as well as past times a host of sectors that failed to brand fresh cost lows inward March. Money flows are thence role of a larger flick of marketplace participation that tin rank us when provide or postulate is growing or waning.

In my recent post, I noted a coin time period difference inside the S&P 500 unloose energy sector (XLE). As cost has moved higher, we're seeing lower peaks inward coin flow, suggesting that postulate for the unloose energy stocks may live on drying up.

Interestingly, we're seeing a like designing amidst the materials stocks from the S&P 500 universe (XLB; run past times chart) as well as amidst the consumer staples issues (XLP; bottom chart). Price has been moving higher for those sectors during May, but coin flows accept been weakening. This tells us that, overall, upticks accept been occurring on lower book than downticks--a sign that large investors as well as traders are leaning to the sell side.

Taken alone, these divergences are exactly yellowish caution lights for the sectors. When they are occurring across a large number of stocks as well as sectors, they are caution lights for the broader market. It's when nosotros come across waning flows accompanied past times fewer stocks making fresh cost highs; divergences inward the cumulative NYSE TICK; as well as divergences inward the number of stocks closing inward a higher house their long-term moving averages that it makes feel to buy the farm concerned nearly meaning cost reversals. I volition live on examining those latter indicators tomorrow inward my indicator update post.
.

Info!! Indicator Review For March 24Th

Back on March 7th, I began noticing a drying upward of stocks making fresh comport marketplace lows relative to January, noting some cracks inwards the foundation of the comport market. These divergences were too apparent in my finally indicator review, which was waiting for stabilization amid the fiscal stocks earlier aggressively taking the long side. The marketplace did give us fresh toll lows on Mon of this past times week, precisely in 1 lawsuit once to a greater extent than the divergences relative to Jan were present. With increasing Fed activism, those fiscal stocks rallied for the residue of the week, posting a three-week closing high inwards the banking index ($BKX). Moreover, the same is truthful of the housing sector index ($HGX), which managed to concord inwards a higher house its toll lows from January. As I write, the ES futures are knocking on the door of of import three-week resistance closed to 1345 inwards the June contract. Are those financials leading the wide marketplace higher?

Let's come across what the indicators are saying:

New Highs/Lows - We tin come across from the pinnacle nautical chart that, despite vigorous buying inwards the sectors hitting hardest past times the recent selling, novel 20-day highs maintain to lag novel lows. Indeed, fifty-fifty amongst Thursday's toll strength, nosotros had 608 stocks across the NYSE, NASDAQ, in addition to ASE brand fresh 20-day novel highs against 1391 novel lows. This suggests that, at to the lowest degree in addition to hence far, the buying is selective in addition to non lifting the wide listing of stocks significantly. We volition need to come across expanded novel high strength--and for certain greatly diminished novel lows--before nosotros tin conclude that the recent bounce is anything to a greater extent than than brusk covering. With eighteen novel 52-week highs in addition to 73 novel lows amid NYSE mutual stocks on Thursday, nosotros too saw an expansion of novel lows, precisely nosotros are good off the 300+ novel lows registered on Monday.

Composite Money Flow - In the bottom chart, I combined the raw coin flows across the xl stocks from the 8 S&P 500 sectors that I reviewed, in addition to hence that nosotros could come across how amount five-day coin flows convey been running vis a vis SPY. What nosotros tin come across is that amount coin menstruation has been running below the nix draw of piece of occupation for the nearly utilisation in addition to is negative at present. This supports what we're seeing amongst the novel high/low data: despite the recent toll bounce, we're non all the same seeing large influxes of funds into equities. I volition hold out watching this indicator, along amongst the novel highs/lows, on whatever examination of the above-mentioned multi-week resistance inwards ES to handicap the odds of upside breakout vs. reversal. That's an consequence that has of import implications for the comport marketplace in addition to its longevity.

Advance-Decline Lines - The Advance-Decline Lines specific to the NYSE mutual stocks, SPX stocks, S&P 600 little caps, in addition to NASDAQ 100 issues all made novel lows finally calendar week in addition to are alone modestly hovering inwards a higher house those lows. The AD Lines specific to the 8 S&P 500 sectors reviewed this past times weekend for coin flows too are nigh their comport lows; none is all the same showing sustained strength.

I volition post service a variety analysis of the Cumulative NYSE TICK subsequently this week. Suffice it to enjoin that the TICK supports the findings from the iii sets of indicators above: alone tepid forcefulness coming off the recent toll lows. I need to come across greater testify of sustained buying involvement earlier terminal that we've seen a plow inwards the recent comport market.
.

Info!! A Expect At Stock Marketplace Coin Flows

Punch upwardly a nautical chart of SPY as well as you'll run across that, fifty-fifty amongst yesterday's drop, we're non far off the marketplace position highs as well as higher upwardly the grade at which nosotros finished 2013.  (My menses index for the nautical chart starts 2013 at a grade of 100).

If, however, nosotros await at the coin flows inwards SPY--the production of the part cost times the shares outstanding--we run across a unlike story.  Money flows for SPY came off difficult during the piece of cake Jan as well as early on Feb turn down as well as stimulate got exclusively bounced partially back.  We stay good off the halt of twelvemonth highs.  

I similar catch measures that reverberate what existent traders as well as investors are doing, non what survey respondents are saying.  You tin run across that marketplace position participants were gobbling upwardly shares toward the halt of 2013: prices kept rising as well as the shares outstanding kept expanding, reflecting rigid demand.  Influenza A virus subtype H5N1 lot of that bullishness came off early on inwards 2014, leading to the recent bounce.  Flows inwards SPY stimulate got stalled during the end few sessions.

The coin menses concept is a handy 1 for assessing sector-specific ETFs every bit well.  Is coin flowing into or then sectors only non others?  Which ones are seeing catch extremes?  In an upcoming post, I'll accept a await at a twain of interesting sector flows.

Further Reading:  Divergences inwards Money Flows

Info!! Indicator Review For June 2Nd

Last week's indicator review noted weakness across many of the measures inwards the wake of a several-day pullback. We've since bounced from those toll lows, but rest good off the highs across virtually of the indicators. Money flows to the S&P 500 stocks expire on to last weak, with divergences mutual since April.

Interestingly, the coin stream divergences jibe what we're seeing inwards the cumulative NYSE TICK (bottom chart), which has shown tepid clitoris since its meridian on Apr seventh in addition to which is currently good off its highs. Unlike coin flow, TICK is non book based, suggesting that we're non but seeing waning summertime volume. Rather, buyer involvement itself seems to last waning since that early on Apr period.

Still, that did non preclude us from making fresh peaks inwards the number of stocks making novel 65-day highs (top chart) during May. Since the pullback 2 weeks ago, the market's bounce has left us good shy of those peaks then far. On Th in addition to Friday, for example, nosotros registered 48 in addition to 57 novel 52-week highs respectively across the NYSE mutual stocks against xvi in addition to eighteen novel lows. By comparison, nosotros had over 150 novel highs 2 weeks ago.

In by indicator reviews, I've noted considerable sector rotation in addition to divergence, fifty-fifty inside the S&P 500 large-cap universe. This continues at acquaint in addition to appears to last a major argue we're non seeing to a greater extent than broad-based clitoris since the January/March marketplace bottom. For example, we're exclusively seeing 30% of fiscal stocks trading inwards a higher house their 20-day moving averages, but 78% of engineering scientific discipline stocks. Materials issues convey shown recent weakness inwards the wake of pullbacks alongside commodities--only 54% are inwards a higher house their 20-day averages--but previously weak wellness attention issues convey bounced, with 73% inwards a higher house their benchmarks.

All inwards all, the weakness inwards TICK in addition to coin flows in addition to the relative functioning of sectors suggests 2 things: 1) that to a greater extent than coin is shifting from sector to sector than genuinely entering the stock market; in addition to 2) that when coin is entering the market, it is doing then selectively (commodity-based themes, technology). This is non necessarily a prescription for a fresh acquit market, but it every bit good is non a company foundation for a sustained marketplace rally. For this reason, as my recent post indicated, I am beingness to a greater extent than tactical than long-term strategic inwards my ain trading.
.

Info!! Marketplace As Well As Sector Perspectives For A Sunday

the recent posts on marketplace cycles, I mapped out (chart above) how I've been viewing the electrical flow cycle, given the divergences noted inwards before posts. With the surge of buying inwards the markets the past times 2 days, it is probable that the recent lows stand upwardly for toll lows for the electrical flow cycle, implying higher marketplace prices good into 2009 (given the stone oil proportionality of the duration of the menses from the momentum high to the toll lows in addition to the menses from those lows to the side past times side bike high). That's the expert news. The bad word is that, at the larger fourth dimension frame, nosotros made a momentum altitude inwards 1999/2000 in addition to a toll altitude inwards October, 2007, implying that nosotros get got yet to brand momentum in addition to toll lows on this larger fourth dimension frame--and that those lows are probable to accept out the 2002-2003 lows.

* Sector Comeback - What a difference a twain of days make! Here are the Technical Strength readings past times sector every bit of Friday's close:

MATERIALS: +260
INDUSTRIAL: +80
CONSUMER DISCRETIONARY: +140
CONSUMER STAPLES: -160
ENERGY: +160
HEALTH CARE: -60
FINANCIAL: +260
TECHNOLOGY: -100

Note that in that location is yet prove of considerable sector rotation, every bit coin left the relative rubber havens (consumer staples, wellness care) in addition to went into the rescued fiscal sector. Note every bit good that nosotros are really far from beingness overbought, despite the abrupt ascent of the terminal twain of days.

* Money Finally Flowing Into the Market? - The large inquiry is: how much of the ascent belatedly inwards the calendar week was majority brusk roofing in addition to how much represented fresh buying interest? Money flow information from the Wall St. Journal constitute meaning positive coin flows into the Dow stocks in addition to the major S&P sectors on Friday. More on that theme inwards the indicator review to hold upwardly posted Mon AM.

* Watch for Themes Going Forward - How volition the recent turmoil in addition to the proposed authorities activity play out inwards the diverse markets? Some things I'll hold upwardly watching going forward:

* Signs of risk-taking or risk-aversion: How practise emerging marketplace equities comport relative to U.S. stocks?

* Interest rates in addition to Commodities: Hard to imagine tightening moves whatsoever fourth dimension soon, given the vulnerability of the economy, only volition long rates in addition to commodities laid about to toll inwards farther inflation?

* Confidence inwards U.S. Dollar - If the U.S. authorities is taking on dodgy debt, volition investors desire to concur U.S. dollars, in addition to volition inflation expectations weigh on the dollar?

* Trader in addition to Investor Sentiment - Will the recent authorities activity boost view amid stock marketplace participants or volition nosotros laid about to encounter doubts that the rescue tin work?

Hard to believe in that location won't hold upwardly repercussions from the government's expansion of debt, including missed opportunities to reform social safety in addition to wellness attention in addition to express room to heighten spending on other priorities, cutting taxes, or tackle novel nation of war machine challenges.
.

Info!! Indicator Review For June 9Th

Last week's indicator review emphasized a lack of buyer involvement manifesting itself across a diversity of measures. Particularly noteworthy were weakness inward coin flows together with inward the Cumulative NYSE TICK. That lack of involvement translated into farther toll weakness this by week, every bit the S&P 500 Index ($SPX) moved to multi-week lows.

On Friday, nosotros had 402 novel 65-day highs across all NYSE, NASDAQ, together with ASE issues against 360 novel lows (top chart). The latter is the highest compass of novel lows since mid-April. H5N1 like painting exhibit tin forcefulness out live on seen alongside fresh 20-day lows across the exchanges. Fri recorded 642 novel 20-day highs against 1242 novel lows. That is the highest compass of novel 20-day lows since March 20th.

This weakness has hitting a bulk of stock marketplace sectors. Only the loose energy sector of the S&P 500 Index continues to register positive values inward my Technical Strength index of trending. Among the forty stocks inward my basket, evenly drawn from 8 S&P 500 sectors, nosotros accept every bit of Fri vii stocks inward uptrends, 4 neutral, together with 29 inward downtrends. Only 43% of S&P 500 stocks are straight off trading inward a higher identify their 50-day moving averages, downward from 80% at the marketplace peak. Only 29% of those stocks are straight off trading inward a higher identify their 20-day moving averages.

Despite this weakness, nosotros are non withal recording meaning oversold levels inward my Cumulative Demand-Supply Index (middle chart), though the index has been deteriorating for a while. Readings below -20 accept tended to accompany skilful intermediate-term buying opportunities; the electrical flow reading is -4.69.

Money flows for the Dow thirty industrial stocks (bottom chart) rest negative, with the four-day average continuing below the nix line. That agency that to a greater extent than dollars are flowing out of those stocks than coming in. Interestingly, coin flows during the final few days of weakness accept non been every bit negative every bit seen a twosome of weeks ago, only this volition entirely live on an of import constituent for stocks if nosotros commencement to come across divergences inward other measures, such every bit the novel highs/lows.

In all, there's non much to live on excited well-nigh for the bulls. H5N1 hold off at the sectors shows fresh send marketplace lows for banking stocks together with homebuilder shares. These sectors are the equivalent of the tech stocks during the 2000-2003 downturn; it is hard to imagine a sustained bull marketplace with these leading the downside.

RELEVANT POST:

Review of Sector Performance
.

Info!! Indicator Update For September 29Th

Last week's indicator review institute weakness prior to the sudden outburst of buying that greeted initial tidings of a authorities rescue plan. Since that time, wrangling over the invention as well as doubts almost its efficacy inwards the appear upwardly of growing depository fiscal establishment failures bring led to farther marketplace as well as indicator weakness. As noted earlier, sectors are largely inwards a hit jump mode as well as money flows bring remained negative. This supports the betoken from concluding calendar week that the buying we've seen has largely represented sector reallocation as well as brusque roofing rather than a sustained commitment to equities.

With the week's selling, the Cumulative Demand/Supply Index (top chart) cruel from a real modestly overbought grade to a real modestly oversold one. This is also consistent alongside a hit jump market. When markets set inwards an of import bottom, the Cumulative DSI ordinarily moves sharply as well as steadily higher. The inability of stocks to sustain positive momentum--which is what the DSI measures--suggests that nosotros may withal hold out waiting for such a bottom.

We also saw weakness inwards the novel 65-day highs minus lows (middle chart), alongside over one k stocks making fresh 65-day lows on Friday. I volition hold out watching this indicator real closely for divergences or confirmations on tests of recent marketplace lows; every bit long every bit the publish of stocks making novel lows is expanding, I am non taking long trades for anything other than a real short-term, intraday position.

Note, too, that the Cumulative NYSE TICK business (bottom chart) has also been hovering inwards a range, non far off its recent lows. (This is also truthful of the advance-decline business specific to NYSE as well as SPX stocks). The messages from the Cumulative TICK, coin flow, as well as DSI measures are unanimous: nosotros are non yet at the betoken where nosotros are sustaining buying, which is what nosotros postulate to run into to set inwards a durable marketplace bottom.

To hold out sure, the divergences noted inwards recent posts--most evident inwards the novel high/low figures--remain; the listing of stocks making fresh annual lows has been shrinking during 2008. While this is necessary for a marketplace bottom, it is not--in itself--sufficient. Until nosotros run into increased buying amid institutions, every bit measured past times NYSE TICK, coin flows, as well as wide forcefulness inwards the other indicators, it is premature to conclude that the behave is produce to hibernate.
.