Market Breadth Update
Everyone in Dusselblogonia (TED: a Romanian village where all finance bloggers live) is bullish and many are highlighting the various instances of an oversold market. Â This alone can makes one nervous, but many indicators are showing a stretched condition that if not resolved Friday, should result in a bounce soon, especially in the 1025-1035 area, should we test there. Â Otherwise, if the low was Friday, I expect another test of 1075-1085 area. Â Â Also don’t forget that Monday’s have been positive ~85% of the time and with the biggest gains, since the March low.
The percent of stocks above/below their 55 day high/lows  is near a bounce zone, but also in a downward channel.  You would want to see this reverse to have more faith in a long move beyond a reflexive bounce.
As you can eyeball, 4 weeks of straight decline typically leads to at least a positive weekly close higher, in a bull market.  You wouldn’t want to use this as your only premise to get long however, it’s just another way to measure overbought/oversold conditions.  In March and July, the market squeezed shorts and moved substantially higher in the weeks following a four week decline.  It’s too soon to know if this will happen yet, and if you count, you will see that of the 10 instances where 4 weeks lower occurred in the chart, 6 led to more downside.
It’s interesting that buying four weeks of consecutive weakness was a poor strategy during the last bear market, but an effective one this time around (those stats on win/loss are from 1965 - present).
The SP:DXY chart is near support which also supports a bounce, however there is the same caveat of being in the downward channel still.
Solid stuff dude - good luck this week!
Thanks ZM. You too.
I bet more people wish they would have read my breadth update, perhaps they would have been more skeptical on today’s prospects.
I’m not sure I interpreted this correctly, but I think there was a collective “Fuck this shit” from equity participants during the second half of the day–lame ass close; lame ass futures so far. Surprising thing was that there were some monster ass clustered institutional sells, and we didn’t drop that much.
yeah Im running the #s for today now…so far, it it’s mixed. Based on recent past, mkt should find support in the 1025-1035 area, with 1050 as a strong psych level. those lower levels would be where id long on a washout. The interesting thing is, that if the market is changing, which I think it may be, than the actions the market rewarded will be punished, viz all those who bought the dip.
currently, for bulls, we have 5 weeks lower, dollar at resistance (price and channel), spx at 189pEMA, slight positive divergences on % stocks above ema, and lower SPX channel support. Thats a lot in favor of a bounce.
And turnaround tuesday whatever the horse that is good for.
For bears, 1075 is now strong r, need to take that out to be bullish, and many indicators/mkt are firmly ensconced in a downward channel, indicating…that the trend is lower. OB/OS < trends at the end of the day. Very little buying on the dip so far, and cumulative weeklys are still bearish.
^money, if I may be so self-aggrandizing.