Info!! Large Cap Strength, Small-Scale Cap Weakness: Great 50 Redux?

The S&P 500 Index (SPY; blueish trace of piece of occupation above) hitting fresh bull marketplace highs this past times week, only non that the number of stocks registering fresh 20-day highs barely exceeded the number making novel lows during the week. Steadily fewer issues accept participated inwards the rally since September, reflecting a narrowing of the bull market's base.

Much of this weakness reflects the relative pull of large cap stocks compared alongside smaller cap issues.

For example, I took a await at the first-class Decision Point site as well as noticed that fully 97% of Dow Industrial stocks are trading inwards a higher house their 20-day exponential moving averages (EMAs). For the S&P 500 large cap stocks, that percent is 72%; for the NASDAQ 100 large caps, the proportion is 75%.

When nosotros await at the wide NYSE Composite Index, however, the percent of stocks trading inwards a higher house their 20-day EMAs is 59%. For the NASDAQ Composite, it is 41%.

Although 72% of S&P 500 large caps are trading inwards a higher house their 20-day EMAs, that percent falls to 61% for S&P 400 midcaps as well as 45% for S&P 600 pocket-size caps.

One logical explanation is that U.S.A. dollar weakness is benefiting large cap companies (which oft accept international operations that produce goodness from a weak dollar) to a greater extent than than pocket-size cap companies. If that is the instance as well as U.S.A. dollar weakness continues, nosotros could run into a repeat of "Nifty Fifty", inwards which marketplace pull is largely driven past times the largest cap stocks.
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Info!! The Bull Marketplace Is Over For Much Of The Stock Market

The recent post highlighted the unusually weak breadth inwards the recent stock market.  Above is an update.  You tin run into that the Cumulative NYSE TICK--a stair out of upticks vs. downticks across all NYSE shares--has tailed off, fifty-fifty every bit nosotros made fresh cost highs inwards SPX (top chart).  This is the get-go fourth dimension this has occurred since the start of the bull market.

Much of this weakness tin survive attributed to the unusually weak activity amidst pocket-sized caps too latterly yesteryear midcaps every bit well.  As you lot tin run into from the bottom 3 charts (shout out to the Index Indicators site), the percentages of stocks trading higher upwardly their 200-day moving averages bring been making lower highs every bit SPX has made recent cost peaks.  The midcaps made a double cost overstep earlier turning downwards lately, too the small  caps brutal good brusk of their early on July peak.  

As of Friday's close, 74% of large cap stocks (SPX) traded higher upwardly their 200-day moving averages.  For the midcaps, that let on is 45%; for the pocket-sized caps, it is 37%.  Incredibly, every bit we've been making all-time novel highs inwards the large cap averages, the bulk of other stocks bring non been trading inwards uptrends.  Even inside the large cap universe, fewer too fewer shares bring participated inwards the strength.  At the recent peak, exclusively 15% of SPX stocks registered novel 52-week highs, downwards from 22% inwards early on July.

The bull marketplace grows narrower too narrower, precisely the existent intelligence is that the bull marketplace is over for a pregnant portion of the stock market.
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Info!! Trading Notes: Calendar Week Of November 2Nd

Friday, Nov 6th

*  Today's early on merchandise promises to hold upwards dominated yesteryear the payrolls data.  Trade overnight slowed downward ahead of the release, but I await it to generate a practiced bargain of activity, given the focus on whether the Fed volition hike rates inwards December.  What I'll hold upwards looking for out of the release is how rates, the dollar, as well as stocks respond--and whether they movement thematically, inwards sympathy.  Any early on movement is to a greater extent than probable to hold upwards sustained if it's business office of a thematic macro trade.

*  That beingness said, I don't take away hold a dandy bargain of conviction going into the report.  I idea the inability to sustain an overnight bounce yesterday was significant, equally was the bounce off the morn lows.  All inwards all, we're overbought longer term, oversold shorter term.  I would need to run across yesterday's lows concord on whatever selling clit per unit of measurement area inwards guild to hold upwards a buyer.

*  Most people are familiar with VIX, the mensurate of volatility implied yesteryear options markets.  Fewer people rail implied correlations: the correlations reflected inwards options pricing.  While VIX has non moved tremendously from the kickoff of the calendar year, the implied correlation with stocks has collapsed.  We're pricing inwards real depression correlations, reflecting a relatively differentiated, rotational environment.  We had a decent sized driblet inwards implied correlation yesterday, such large drops take away hold by as well as large been bullish 3-5 days out.  I'll hold upwards sharing to a greater extent than query on implied correlation inwards coming days.  The index symbol is $ICJ.

Thursday, Nov 5th

*  Yesterday's postal service noted concerns over risk/reward as well as Wednesday's merchandise offered a pullback, equally nosotros closed with fewer than 50% of SPX stocks higher upwards their three-day moving averages.  We closed close levels that take away hold been associated with short-term buying opportunities (see nautical chart below) as well as take away hold bounced higher overnight, then buying weakness that holds higher upwards the overnight lows as well as at to the lowest degree testing the recent highs is a reasonable strategy.

*  Yesterday's movement higher inwards rates inwards the wake of the Fed chair's statements contributed to USD strength, commodity weakness, as well as weakness inwards stocks.  That blueprint is worth keeping an oculus on going forward.  When markets merchandise thematically--multiple property classes moving inwards a coherent pattern--that merchandise is by as well as large supported yesteryear large institutions as well as volition take away hold only about legs, short-term.  Only watching the musical instrument you're trading loses a lot of information.

*  I'm too increasingly cognizant of how many directional moves teach off the dry soil during European as well as Asian hours.  Indeed, the median movement from opened upwards to unopen inwards SPY has been close the same equally the overnight movement during 2015.  Anyone limiting stock index trading to U.S. hours effectively cuts the chance laid inwards half.

Wednesday, Nov 4th

*  Stocks by as well as large continued their clit on Tuesday, moving to novel highs for this move.  I used the occasion to take away hold profits.  It's non that I intend the bull run has ended for good.  Rather, I'm non inwards dear with the risk/reward hither after a enterprise movement higher.  Specifically, nosotros are non entirely overbought on my breadth measures (more than 70% of stocks higher upwards their curt as well as medium term moving averages), but yesterday displayed waning breadth relative to Mon for the SPX shares.

*  With observe to breadth, it's noteworthy that nosotros registered 410 stocks making fresh three-month highs yesterday, which is soundless below the publish of novel highs seen final week.  One argue I'm non overly concerned yesteryear this seeming breadth difference is that then few stocks are making fresh 3 calendar month lows--only 65.  Returns inwards SPY tend to hold upwards best when the publish of stocks making novel lows are real high as well as real low.  You need to run across an increasing publish of shares displaying weakness earlier the marketplace position equally a whole turns over.  We're non seeing that then far.  What we're seeing is a rotational market, with formerly weak sectors, such equally liberate energy shares, forthwith perking up.

*  Below is a nautical chart of breadth for the SPX stocks.  It captures the percent of stocks trading higher upwards their 3, 5, 10, as well as 20-day moving averages.  (Raw information from Index Indicators).  Note that after a breadth thrust higher next the tardily September lows, we've by as well as large stayed higher upwards 50%.  Pullbacks inwards the breadth mensurate take away hold been practiced entries on the long side.  As long equally nosotros teach dips inwards the breadth mensurate occurring at successively higher toll lows, I consider the uptrend to hold upwards intact.

Tuesday, Nov 3rd

*  Yesterday's postal service noted the possibility of broadening buying inwards stocks as well as that is just what nosotros got, with little caps catching upwards to larger caps as well as SPX making novel highs for this move.  Indeed, yesterday was a poster tyke for an upside tendency day, with a skewed positive distribution of NYSE TICK values through the day.  Here's a post that outlines 4 keys to an upside tendency day.  Recognizing those days relatively early on inwards the session tin ship away hold upwards real valuable.

*  Below y'all tin ship away run across the breakout inwards the cumulative uptick/downtick trouble (red line; 9/25/15 - present), which represents upticks minus downticks for all stocks, all exchanges.  As long equally we're making novel highs on that measure, I top on to thin to the long side.

*  H5N1 breakdown of upticks vs. downticks for yesterday's merchandise institute that what was then meaning close the tendency twenty-four hours was the close full absence of selling pressure, rather than a huge jump with buyers.  (This was too evident inwards yesterday's relatively small-scale volume).  Indeed, since 2012, I've seen entirely 21 days with similar levels of depression selling.  Five days later, SPY was upwards 17 times, downward 4 for an average gain of +.51%, though, interestingly, at that topographic point was no item border for the side yesteryear side day.

Monday, Nov 2nd

*  Stocks experienced a tardily twenty-four hours selloff on Fri as well as extended the selling overnight earlier stabilizing a bit.  We top on to run across large cap shares (SPX) brand higher lows as well as higher highs and, then far, the recent selling does non modify that pattern.  Meanwhile, the Russell 2000 Index of little as well as midcap shares has shown relative weakness, but all of that powerfulness hold upwards business office of an extended, flattish correction (see below).  Should little cap clit bring together the larger caps, inwards keeping with year-end seasonals, nosotros could run across a melt-up inwards stocks.  I don't listen many people talking close that possibility.  My chore equally a trader is to hold upwards aware of a diversity of scenarios as well as the testify that would back upwards each; non to impose my predilection on markets.  I take away hold been operating with an supposition that we've already seen a momentum peak for stocks, but I'm opened upwards to revising that view--and renewed involvement inwards smaller caps would sure as shooting spark such a revision.

*  On a 6 calendar month as well as one-year basis, raw materials shares--stocks related to the commodity sector--have been the weakest yesteryear quite a margin.  Interestingly, however, over the yesteryear month, those raw materials stocks take away hold been marketplace position leaders, per the nautical chart below from the first-class FinViz site.  Commodities are sensitive to patterns of global growth, then I'm watching those--and commodity related sectors such equally XLB as well as XLE--quite closely.

Info!! Midday Briefing For April 21St: Small-Scale Cap Strength

While we've seen selling inwards the large cap S&P 500 Index today, modest caps are asset most their bull highs in addition to nosotros genuinely convey a few to a greater extent than stocks rise on the solar daytime than declining. Sector functioning is mixed, with weakness with fiscal in addition to wellness tending stocks in addition to relative line with the industrial in addition to consumer discretionary shares.
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Info!! Trading Notes For The Calendar Week Of March 14, 2016

Friday, March 18th

*  Steve Spencer of SMB emphasizes that cost activity next a catalytic lawsuit provides us amongst of import information.  This is especially truthful when nosotros run across a modify inwards the distribution of transactions next a word lawsuit or other catalyst.  Increased book together with a novel skew of book lifting offers versus hitting bids, for example, tells us that fresh buying flows receive got come upwards into the market.  This calls for an updating of our views of the stock or index.

*  This lesson has been especially relevant inwards the wake of the Fed announcement.  My cumulative stair out of upticks vs. downticks has hitting novel highs for this displace together with breadth, which had been waning, vaulted to novel highs.  Below nosotros tin run across the nautical chart of stocks across all changes making fresh 3-month novel highs vs. lows.  The vigor of buying next the Fed annunciation suggests that this, indeed, was a game changer.  Central banks globally are opting for accommodation and, historically, that has been favorable toward stocks.

*  The China/deflation thesis, which dominated give-and-take during recent marketplace weakness, is far less discussed I find, given stone oil clit together with USD weakness.  For stocks, inwards a negative involvement charge per unit of measurement world, anything rubber amongst yield continues to discovery interest.

Thursday, March 17th

*  Interesting commentary on the fright of missing marketplace moves from Victor Niederhoffer.  Many a bad merchandise is made because of the ego, non because of the objective marketplace opportunity.

*  We saw a ascent to novel highs on the heels of the Fed announcement, amongst enterprise buying interest.  Recent posts receive got commented on weak breadth and, for the marketplace overall, the breadth movie did non amend despite the Fed-related strength.  Across all exchanges, nosotros saw 753 novel monthly highs against 254 lows.  The latter is in 1 lawsuit again an uptick inwards novel lows together with the novel highs are one-half of what nosotros saw 2 weeks ago.  Among SPX shares only, stocks making fresh 100-day novel highs versus lows did expand to a marginal novel peak.  Much of the weakness is amid small-scale cap shares, though fiscal together with wellness aid stocks inside SPX are likewise lagging.  With the mixed breadth picture, I'm non surprised to run across some retracement of yesterday's gains inwards premarket merchandise today.

*  Breadth issues notwithstanding, it's clear that this has been a vigorous bull displace from the Feb lows.  Note below how we've stayed "overbought" on my multiperiod clit stair out (daily tracking of SPX stocks making 5, 20, together with 100-day novel highs versus lows) for a number of days.  This exclusively occurs inwards trending markets.  While the breadth issues oft precede correction, my base of operations illustration is to sentiment such a correction equally a buying opportunity.  

 

*  I'm working on creating a cycle-based stair out of short-term momentum together with value effects inwards the ES market.  The thought is to seat when markets are most probable to proceed versus opposite their most recent directional movement.  Interestingly, the market's ascent yesterday occurred on a depression value of the momentum measure.  More to come upwards on this research.

Wednesday, March 16th

*  Jim Dalton, who has pioneered trading via Market Profile, is offering his in conclusion mentorship computer programme earlier his retirement.  I likewise run across Terry Liberman will live doing a webinar amongst Jim afterwards today.  When I taught an internship computer programme inwards Chicago many years ago, Jim's piece of occupation was the exclusively mandated reading.  I proceed to discovery Market Profile helpful equally a conceptual framework for thinking nearly marketplace behavior.

*  After some early on weakness, nosotros saw buying inwards stocks, but small-scale caps proceed to notably underperform large caps.  As a result, nosotros run across continuing deterioration amid the breadth measures.  New monthly lows ticked upwards to 192, the highest degree since Feb 24th together with monthly highs dipped to 451.  Relatively weak sectors lately include unloose energy shares (XLE) together with healthcare (XLV).  Today's trading volition live dominated past times the afternoon's Fed announcement.  

*  We proceed quite stretched on my intermediate clit measure, which looks at the number of SPX shares making fresh 5, 20, together with 100-day highs versus lows.  (Data from Index Indicators).  If the Fed-related merchandise can't interruption us from the breadth deterioration, I await an intermediate-term correction.  That would non necessarily live an terminate to the bull displace from February's lows, but could advise a new, topping stage to the electrical current marketplace cycle.  During a topping stage nosotros tin run across higher overall prices for the index, but amongst deterioration inwards some sectors contributing to lagging breadth.  

   
*  Here is a unique intraday indicator that looks at buying clit per unit of measurement area amid all U.S. listed shares.  It tracks upticks amid all shares (data from e-Signal) together with expresses the final result inwards measure difference units.  This shows us when important buying is coming into the market.  It likewise shows us when at that topographic point is a meaningful absence of buying.  (A corresponding stair out tracks important selling together with absence of selling pressure).  It helps longer-term positions when those are going amongst the flows.  The nautical chart below shows yesterday's market.

Tuesday, March 15th

*  I'll live making an improver to these marketplace notes together with including each 24-hour interval links to readings that I discovery specially informative together with useful.  To boot this off, banking concern check out the Paststat blog for daily trading ideas based upon historical patterns, including this 1 based upon seasonality.  From my perspective, such patterns are the starting signal for analysis, non an terminate point.  Once nosotros run across a pattern, the difficult piece of occupation remains of deciding: 1) is the electrical current marketplace authorities typical of the menstruum covered past times the historical test; 2) is at that topographic point a audio argue for the beingness of the pattern, or mightiness the designing live a random occurrence; together with 3) what is the variability or together with thus the designing (could yous endure the exceptional instances)?  Factoring marketplace history into trading decisions is no guarantee of success--it's slow to aspect inwards together with thus many places that some "significant" designing appears--but ignorance of marketplace history is non just a promising alternative.

*  The relative absence of selling clit per unit of measurement area inwards Monday's session was noteworthy together with helped atomic number 82 to higher prices for much of the session earlier a belatedly selling burst.  Selling has continued overnight amongst no novel shot inwards the arm from the Bank of Japan.  Trading was unusually wearisome on Mon together with nosotros could larn to a greater extent than of the same ahead of tomorrow's Fed announcement.  Note how short-term breadth has been potent for a number of days; the stair out below tracks the percent of SPX stocks closing to a higher house their 3, 5, together with 10-day moving averages.  (Data from Index Indicators).

       
 *  The marketplace looks tired to me--for the origin fourth dimension since the liftoff from the Feb lows.  Specifically, we're getting fewer shares registering novel highs during marketplace rallies.  Much of that relative weakness is coming from small-scale cap shares.  Yesterday nosotros saw 921 stocks across all exchanges brand fresh monthly highs against over 2000 in conclusion week.  (Data from the Barchart site).  No private sector inside the SPX looks distinctively weak together with I'm non at all convinced that we're going into deport mode.  Rather, I await a normal correction inside a bull move.  With the absence of selling having problem bringing us higher, I'm leaning toward selling bounces that cannot maintain us to a higher house the overnight highs.  Of course, the upcoming Fed annunciation volition supply a major catalyst for stocks tomorrow.


Monday, March 14th

*  Those who know me good know that I create non subscribe to the thought that successful trading is by together with large a operate of psychology.  Without an objective trading edge, one's frame of bespeak heed volition but dictate the charge per unit of measurement at which nosotros portion amongst our capital.  Still, psychology is necessary, if non sufficient, for success together with yesterday's post service was mayhap my clearest explanation why.

*  We shut close the highs on Friday, continuing the upswing next the post-ECB selloff.  The ascent left us quite stretched short-term, amongst over 90% of SPX stocks trading to a higher house their 3, 5, 10, together with 20-day moving averages.  This inwards itself is non a mutual occurrence.  Going dorsum to 2006, I could exclusively discovery 12 instances of this happening when VIX has been below 20.  Interestingly, three were up, ix downward the side past times side 24-hour interval for a internet loss, but 10 were up, 2 downward after three days.  We're trading a fighting lower premarket equally I write; the depth of a side past times side pullback volition state us a lot nearly possible upside momentum over the side past times side few days.

*  One line of piece of occupation concern starting to travel inwards my caput is that Friday's highs were the origin inwards which nosotros saw sizable breadth divergences.  If nosotros aspect at all stocks across all exchanges, nosotros tin run across that 1087 made fresh monthly highs on Fri against 2082 the prior Friday.  Much of this is a operate of relative weakness amid small-scale caps.  We exclusively had 92 novel monthly lows on Friday, together with thus naught is standing out equally weak together with I'm non expecting whatsoever grand reversal.  I am concerned, however, that nosotros could run across a decent pullback from these levels equally portion of the start of a topping process.  Bottom line is that I was happy to receive got profits belatedly Fri together with I'm happy to remain on the sidelines together with run across what the bears tin bring.  Ideally, I'd similar to live a buyer of weakness early on inwards the calendar week for at to the lowest degree a retest of highs thereafter.  But I'm non seeing favorably skewed risk/reward right here, right now.

Info!! Indicator Update For March 3Rd

my concluding indicator update, I concluded that, "All inwards all, the prove is suggesting an absence of bullish interest, equally observed inwards the NYSE TICK, the weak novel highs/lows, weak momentum, together with tepid AD Lines." This yesteryear week, non much has changed that assessment.

* New Highs/Lows - We tin meet from the hap nautical chart that novel twenty 24-hour interval lows vs. highs convey continued to expand, amongst 395 NYSE, NASDAQ, together with ASE stocks making fresh highs together with 1665 making novel lows. As long equally novel lows are expanding, it is premature to locomote bottom-fishing for anything other than a short-term trade. At a wider fourth dimension frame, nosotros had fifteen NYSE mutual stocks register fresh 52-week highs on Friday, against 99 novel lows. The latter is the highest number of novel lows since the Jan bottom. Among S&P 500 stocks, nosotros had no annual highs on Fri against 26 novel lows; amidst S&P 600 small-scale cap issues, nosotros had two novel 52-week highs together with 37 novel lows. All inwards all, we're seeing a deterioration of strength, though novel lows are good off their real expanded levels from belatedly January.

* Cumulative Adjusted TICK Line - Note from the 2nd nautical chart higher upwards how the recent marketplace bounce was non at all confirmed yesteryear our Cumulative Adjusted TICK Line, suggesting that bullish participation was waning. Since then, we've broken to novel lows inwards the Line, confirming what we're seeing amidst the novel highs/lows. We take away to meet bullish thought sustained earlier nosotros tin set inwards a durable marketplace bottom. The TICK Line bounce from the Jan lows was impressive, but has since faded. My readings from Th together with Fri advise both an absence of buyers (low positive TICK readings) together with an excess of selling pull per unit of measurement area (extreme negative TICK readings).

* Overbought/Oversold - The bottom nautical chart tracks the cumulative draw of piece of occupation for my Demand/Supply Indicator, which has been a real proficient overbought/oversold mensurate of late. We meet deterioration inwards the cumulative draw of piece of occupation inwards keeping amongst the novel highs/lows together with TICK, equally we've entered oversold territory. Note that readings below -30 convey typified recent marketplace lows on a short-to-intermediate term basis; we're currently some -10.

* Advance/Decline Lines - The AD Line for NYSE mutual stocks remains higher upwards its Jan lows, though non yesteryear much. The same is truthful for the AD Line specific to S&P 500 together with NASDAQ 100 stocks, but we're seeing marginal novel lows inwards the AD Line for the S&P 600 small-scale caps together with the broad NASDAQ Composite. This is telling us that small-scale caps convey resumed weakness relative to large caps. All of these lines are inwards downtrends longer-term.

* Momentum - Among S&P 500 stocks, we're seeing 24% trading higher upwards their 50-day moving averages, a pregnant deterioration from the 55% at the recent marketplace peak. Similarly, we're seeing 29% of S&P 600 small-scale cap stocks trading higher upwards their 50-day MAs, downwards from 51% recently. My Demand/Supply mensurate of short-term momentum was real weak on Friday, amongst Demand at 24 together with Supply at 228. It is non at all odd for momentum to striking extremes earlier nosotros meet actual cost highs or lows for a marketplace move.

All inwards all, nosotros dice on to meet deterioration inwards the indicators together with a possible exam of the Jan lows inwards the making. I am non inclined to purchase this marketplace until nosotros meet definitive prove of greater buying interest, momentum, together with strength.
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Info!! Trading Notes For The Calendar Week Of March 7, 2016

Friday, March 11th

*  Thursday's ECB coming together brought stock buying together with euro selling--and together with therefore a sudden reversal of both during the twenty-four hr flow earlier a rally belatedly inwards the twenty-four hr flow together with overnight brought us dorsum toward the highs.  As the one-hour oscillator of upticks/downticks for all listed stocks shows below, the selling was quite wide during yesterday's selloff together with the buying has been wide on the reversal.  New highs vs. lows for listed stocks deteriorated yesterday, therefore I volition endure watching breadth going forrad to view if participation expands or contracts on upside moves.

*  We've turned downward on the cumulative publish of purchase vs. sell signals given past times the Wilder Parabolic-SAR system.  That tracks all NYSE shares on an end-of-day dry reason (raw information from Stock Charts).  Note that, during vigorous upward wheel phases, such every bit nosotros had inwards Oct of final year, the cumulative SAR stair out volition peak ahead of price.  So far, during the deterioration inwards the measure, toll has held upwardly well.  I thin toward buying weakness that remains higher upwardly yesterday's lows.

 
*  I noticed some underperformance of minor cap shares yesterday.  One twenty-four hr flow does non brand a trend, only during the vigorous ascent from the Feb lows, minor caps were outperformers.  I volition endure watching that relative performance going forward, every bit it could offering clues every bit to the eventual turning of the cycle.


Thursday, March 10th

*  Midweek saw rangebound markets, every bit selling greeted early on strength, only stocks past times together with large held against their prior day's lows.  We closed amongst nether 50% of SPX stocks nether their three together with 5-day moving averages.  Going into the ECB announcement, nosotros quest to view the lows of the final 2 days concord upwardly inwards lodge to maintain the vigorous uptrend from the Feb lows.

*  Here is a nautical chart of the publish of NYSE stocks giving purchase signals versus sell signals amongst observe to their Bollinger Bands--a really useful stair out of wide marketplace forcefulness vs. weakness.  Note the upthrust from the Feb lows, followed past times a pullback inwards purchase signals, only non at a betoken where we're getting internet sell signals.  It is mutual for thrusts higher inwards the Bollinger stair out to endure followed past times farther toll strength; marketplace rises conk vulnerable when nosotros laid about seeing internet sell signals. Note how thrusts lower inwards the stair out convey represented practiced buying opportunities every bit a whole.

*  I late wrote on the theme of a powerful stair out of stock marketplace sentiment.  Interestingly, that stair out shows a internet reduction of SPY shares outstanding over the past times 5, 10, together with 20 trading sessions.  That configuration has tended to Pb to toll gains over the side past times side 5-20 trading sessions.


Wednesday, March 9th

*  Monday's post talked most a normal correction from stretched levels together with nosotros got that yesterday, every bit most 19% of SPX stocks closed higher upwardly their 3-day moving averages together with 26% higher upwardly their 5-day averages.  In an uptrend, nosotros await short-term oversold levels to tumble out at successively higher toll lows.  We're seeing a bounce inwards overnight merchandise together with my base of operations instance is that yesterday's lows concord every bit nosotros ready a examine of the recent highs.  Of course, marketplace reply to tomorrow's ECB proclamation could convey a lot to do amongst whether that base of operations instance plays out or not.

*  Yesterday, stocks across all exchanges making fresh monthly highs dropped from 1720 to 719; novel lows rose from fourscore to 88.  In general, I exclusively conk concerned most the reversals of wheel uptrends when novel lows expand meaningfully.  The past times calendar week we've had the lowest publish of novel monthly lows inwards years.  The absence of weakness ends upwardly beingness every bit rigid a predictor every bit the presence of strength.  Markets mostly plough because i or to a greater extent than sectors are rolling over, creating the expansion of novel lows.

*  Here's a aspect at the performance of major stock marketplace sectors from the Finviz site.  Note how the sectors that led performance on the downside (utilities) are instantly lagging together with how those most wound inwards the downturn (raw materials) are instantly leading performers.  If the uptrend is to continue, nosotros would desire to view wide participation of the sectors; a rally amongst rigid sector rotation is what oft leads to a to a greater extent than prolonged correction.

 


Tuesday, March 8th

*  After a sizable run higher, we're get-go to view signs of distribution.  While the publish of stocks across all exchanges hitting fresh monthly highs was impressive yesterday (1720), that publish was below the levels seen the prior twenty-four hr flow (2082) together with the twenty-four hr flow earlier that (1868).  Small cap together with midcap stocks maintain to outperform.  NASDAQ shares convey been relatively weak; commodity-related shares convey been relatively strong.  Consumer staples shares (XLP) striking a novel high yesterday, business office of a theme that I believe volition emerge inwards this the world of growing negative involvement rates:  the appeal of stable, high lineament stocks that offering relatively rubber together with attractive yields.  Such stocks are richly valued already, only could view bubble-like performance should key banks maintain downward the negative charge per unit of measurement path.

*  Commodities convey staged a important rally; DBC is instantly higher upwardly its Dec 31st unopen (see below).  The the US dollar (UUP) is downward on the year.  With ECB coming upwardly on Thursday, powerfulness nosotros endure pricing inwards important reflation, together with powerfulness the key banks inwards Nippon together with Europe endure embarking on stimulus measures higher upwardly together with beyond negative involvement rates together with bond-buying?  That would endure a most important macro development.

*  The recent selling to a greater extent than or less the 2000 grade inwards ES notwithstanding, I maintain to endure impressed past times the vigor of the rally off the Feb lows.  Note below how we've gone from an overbought province of affairs to an fifty-fifty to a greater extent than overbought one, amongst stocks moving steadily higher.  (Chart tracks SPX stocks making novel highs versus lows over 5, 20, together with 100-day lookback periods).  If indeed we're getting reflation from key banks, the implications for stocks would non endure short-term together with could maintain to powerfulness shares higher.

Monday, March 7th

*  If our trading does non supply these 4 psychological benefits, we're apt to underperform together with lose our powerfulness to perform inwards the zone.  We tin dismiss best handle our positions if we're managing ourselves well.

*  We saw some wide selling belatedly on Fri together with therefore far convey non been able to bounce inwards overnight trading.  Fri closed amongst over 80% of SPX stocks closing higher upwardly their 5, 10, 20, together with 50-day moving averages, only a waning pct closing higher upwardly their 3-day averages.  (Data from Index Indicators).  I would non endure surprised to view a normal correction of the recent strength; that should terminate higher upwardly the belatedly Feb lows to sustain the electrical current uptrend.  I would likewise non endure surprised to view subdued risk-taking ahead of this week's ECB meeting.

*  The intermediate-term wheel measures that I rail maintain to endure stretched to the upside.  Note how we've rallied inwards the human face upwardly of an "overbought" cycle.  That momentum suggests that we're non however at a betoken where nosotros would await the uptrend to meaningfully reverse.  

*  One stair out I rail is the volatility of marketplace breadth.  Specifically, I rail the volatility of the daily readings of SPX 500 stocks making fresh novel highs together with lows on a 5, 20, together with 100-day basis.  We late striking a meaningfully depression grade inwards that measure.  Since 2010, when we've been inwards the lowest quartile of readings for breadth volatility (as at present), the side past times side 5 days inwards SPX convey averaged a gain of exclusively .01%.  When we've been inwards the highest quartile, the side past times side 5 days inwards SPX convey averaged a gain of +.44%.  It's i to a greater extent than stair out that makes me opened upwardly to the possibility of some short-term correction of the recent marketplace strength.

Info!! Sector Update For November 22Nd

Last week's sector review noted trace with large cap stocks, simply weakness inside specific sectors in addition to with small-scale caps. This by calendar week failed to come across a broadening of the marketplace rally, in addition to nosotros moved lower every bit the calendar week progressed. That left the 8 sectors that I runway weekly (above) inward a mixed Technical Strength status.

(Recall that Technical Strength is a proprietary short-term mensurate of trending in addition to varies from a real bullish +500 to a real bearish -500, with scores betwixt -100 in addition to +100 indicating no important directional tendency).

What nosotros come across is that Health Care stocks are the entirely grouping inward a rigid uptrend; Financial shares rest inward a downtrend. Other sectors are either non-trending or weakly trending higher. The greatest week-over-week turn down inward trace occurred with Consumer Discretionary in addition to Energy stocks, every bit economically-sensitive sectors weakened overall.

Here is how the sectors looked every bit of Friday's close:

MATERIALS: 220
INDUSTRIAL: 120
CONSUMER DISCRETIONARY: 80
CONSUMER STAPLES: 220
ENERGY: -40
HEALTH CARE: 320
FINANCIAL: -200
TECHNOLOGY: 80

We tin come across from the nautical chart higher upward that Financial stocks accept been inward a negative trace fashion for several weeks running. This bears watching: it is odd for a sector to non demo greater rotation during a menstruation of by in addition to large line of piece of employment solid index prices. Such persistent weakness suggests that investors may live on anticipating farther bad tidings from this substitution sector.

Overall, however, the sector readings are neither meaningfully overbought or oversold. They're consistent with a consolidating/correcting marketplace that has moved significantly higher since slow October, simply are non at levels that accept been seen at recent intermediate-term bottoms. As always, I volition live on tracking marketplace trending via my handbasket of stocks each morning time prior to the marketplace opened upward via Twitter (check out this post.
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Info!! Making Feel Of This Wtf Market

Traders bring been experiencing an understandable representative of whiplash the final few days.  More than i someone contacting me has commented on the confusing nature of the marketplace action.  To endeavor in addition to brand feel of what has been going on, I included ii charts above, both of which I discovery helpful inwards gauging underlying marketplace trend.

The transcend nautical chart is the Cumulative NYSE TICK in addition to represents the release of upticks vs. downticks across all NYSE shares each infinitesimal of the day.  By cumulating that fourth dimension series, inwards the style of an advance-decline line, nosotros tin gain of feel for accumulation or distribution across the wide stock universe.  (Data obtained from read at the fourth dimension was that the wide marketplace had ceased to business office inwards a bull market, due to weakness across small-scale caps in addition to midcaps.

We tin encounter that the refuse inwards Cumulative TICK has continued with the recent marketplace decline, every bit we're at in i lawsuit seeing the weakness alongside small-scale in addition to midcaps extend to the larger caps.  Of item note, the Cumulative trouble has breached its early on August lows.

The bottom nautical chart is a fleck to a greater extent than sensitive in addition to is based on upside in addition to downside strength.  What we're looking at is likewise a cumulative line, but this is a cyberspace full of the release of stocks each twenty-four hr catamenia closing higher upward in addition to below their upper in addition to lower Bollinger Bands, across all NYSE shares.  (Data obtained via Bollinger Balance trouble peaked early on inwards July, dramatically underperformed at the August in addition to September peaks in addition to at in i lawsuit has fallen off the confront of the populace every bit few shares are trading with strength.  

By cumulating breadth data--I discovery these measures much to a greater extent than sensitive than the criterion advance-decline trouble gauges--we tin encounter what is happening over fourth dimension across all stocks, non exactly the large names that dominate the cap-weighted stock indexes.  It's because of the weakness inwards these measures that I bring non been inclined to purchase the marketplace but because it's oversold.

Further Reading:  Interpreting Market Action With NYSE TICK
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Info!! How To Read Marketplace Cycles

I detect it helpful to intend inwards terms of marketplace cycles, rather than trends.  H5N1 cycle consists of both trending together with non-trending components.  Understanding where we're at inwards cycles helps us seat whether nosotros desire to last going amongst forcefulness or weakness or whether nosotros desire to fade these.  Once nosotros intend inwards cycles, it's light-headed to seat ourselves equally tendency traders or counter-trend traders.  Our chore is to profits from the diverse phases of marketplace cycles, non essay out to brand marketplace action lucifer our predetermined trading preference.

Cycles are similar snowflakes:  no 2 are identical together with yet all accept a similar structure.  Let's review the phases of a marketplace cycle:

1)  Market Momentum Bottom - Here is where nosotros launder out on elevated volume, amongst a maximum release of stocks registering fresh novel lows.  Volatility is high together with correlation is high, equally the corking bulk of stocks together with sectors are participating inwards the decline.  An event of a marketplace momentum depression was Jan 20, 2016, when nosotros dropped on high book amongst over 2600 stocks across all exchanges registering fresh three-month lows.

2)  Market Bottoming - The extreme selling brings inwards value buyers together with nosotros larn a abrupt bounce from the marketplace lows, followed past times farther attempts at selling.  At major marketplace lows, this bottoming procedure tin laissez passer notice lead house over a stream of weeks or more; at intermediate lows, it may lead house over subsequent days.  An event of a bottoming procedure was the bounce into the showtime of February, 2016 followed past times a turn down to novel closing cost lows on Feb 11th.  Only 1353 stocks made fresh three-month lows at that time, showing that selling pressure level was having difficulty moving the corking bulk of shares lower.

3)  Bull Momentum Phase - With the inability of sellers to movement the bulk of stocks lower, value buyers render amongst a vengeance aided past times short-covering together with that moves the marketplace steadily higher.  Volume together with volatility are even together with then high, amongst the vast bulk of stocks lifted off their lows.  In this phase, nosotros oftentimes hold off for pullbacks simply larn none of corking magnitude, equally momentum enables forcefulness to follow from strength.  H5N1 proficient event of a momentum stage was the abrupt movement of stocks higher from mid-February, 2016 through much of March together with early on April.

4)  Bull Topping Phase - Here is where higher prices larn to the yell for where the marketplace is no longer attractive to value participants together with bulls are relatively loaded up.  This results inwards a drib of book together with relatively depression levels of volatility.  Correlations movement lower equally around sectors together with stocks drib dead on strong, spell others start out to lag.  Late inwards a topping phase, nosotros tin laissez passer notice run across the release of stocks making fresh short-term lows expand, fifty-fifty equally the overall marketplace averages are almost their highs.  H5N1 curt topping stage occurred from mid-April, 2016 through early on June.  Over that time, cost moved higher, simply novel three-month highs dropped from 1113 to 818.

5)  Bear Momentum Phase - The inability of buyers to force the marketplace to novel highs attracts the participation of sellers together with book together with volatility 1 time once to a greater extent than selection up.  The marketplace tin laissez passer notice stay oversold for a while, equally bulls larn out their positions together with shorts are emboldened.  Correlations rise, together with nosotros movement toward a marketplace momentum bottom.  The marketplace demonstrated an intermediate deport momentum stage from early on June, 2016 to belatedly June.  At that bottom, nosotros did non run across an elaborated bottoming process.  When a pullback occurred, it was from a higher cost yell for together with resulted inwards a higher cost low.  This led to a quick rally higher into August.

As a rule, the longer the deport marketplace stage together with bottoming processes, the longer the subsequent rally.  The longer the bull topping phase, the to a greater extent than extreme the subsequent deport phase.  When to a greater extent than marketplace participants are trapped curt or long, the unwinds tend to last greater.

Cycle construction tin laissez passer notice render us amongst a route map for gauging where nosotros stand upwards amongst honor to "overbought" together with "oversold" markets together with the likelihood that forcefulness or weakness volition drib dead on or reverse.  I purpose cycles less for predicting markets than agreement them.  Knowing where we're at inwards a marketplace cycle helps us avoid chasing markets at the incorrect fourth dimension together with likewise helps us avoid standing aside during the market's periods of momentum.  Most of the indicators I rail are ways of gauging 24-hour interval to 24-hour interval forcefulness together with weakness together with updating where nosotros stand upwards inwards terms of cycle structure.

At present, nosotros run across book together with volatility at relatively depression levels together with small-scale cap shares underperforming large caps.  That has contributed to a ascent inwards the release of stocks registering fresh short-term lows.  For example, on Mon nosotros had 520 stocks across all exchanges brand novel monthly highs, simply 694 register fresh monthly lows.  Technology shares accept made novel highs, simply many sectors stay below their peaks.  All of that raises the odds that we're at a relatively late, topping stream inwards the recent bull cycle.

Further Reading:  Relative Volume together with Links to the Indicators I Follow
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