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.
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