Some good news and some bad news about the past few days of rallies:

The big rally on Wednesday saw a 92% Up/Down Volume on moderately expanding volume (modestly above the 30 day average). It offset Friday’s NFP sell off (which was also a 90% down day).

Choose your technical poison: 200 day moving average for S&P 500, 14-day Stochastic indicator, and other short-term indicators were all deeply oversold. Watch the percentage of stocks trading above 10-day moving averages to determine when this condition is abated.

For this snapback to have staying power, a rise in volume as the rally progresses is significant. The key resistance will be the May 29th highs. Note also that option traders are not believers in this move.

Now for the bad news: Yesterday stunk the joint up. Worse than a down day is a strong open that fades. Yesterday saw the Dow up 140 points,  the Nasdaq up nearly 30 points. The Dow gave up 100 points, the S&)500 flipped negative, and the Nasdaq got clocked.

As markets got closer to those May 29th highs, the buying interest collapsed. That is a classic failed test of prior highs. Lowry’s reports that market internals were negative, with “57% of Up/Down Volume to the downside. NASDAQ internals were worse, with Down Volume 69% of total Up/Down Volume and 414 more declines than advances.

Category: Markets, Technical Analysis

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4 Responses to “Look Out (modestly) Below, Friday Edition”

  1. Mike in Nola says:

    But there’s always Central Bank rescues to hope for. Tried putting on Bloomberg TV while I’m cooking and then they put on some girl who just droned on about all the “signs” that central bankers might do something. It actually only lasted a minute or two, but had turn it off. So hoping for a central bank rescue is your primary investment strategy? Pretty lame.

  2. VennData says:

    Why don’t any of these stochastic oversold indicators tell us when to buy BEFORE the big pop?

  3. Ted Kavadas says:

    I am viewing the last few days’ uptrend in the stock market, to yesterday’s S&P500 close of 1314.99, as intermittent strength within a continuing downtrend.

    IMHO there are many disconcerting signs in the markets; some include financial stock weakness, rapidly falling crude oil prices and commodity weakness; and increasing market volatility.

    My overall analysis continues to indicate a highly elevated and rising level of risk in both the financial markets and economy; which IMHO shouldn’t be underestimated.

  4. “Hope investing” never worked out for me before. If you apply the “hope” test to headlines it can prevent you from getting into alot of trouble. The rally after the fall was based on “the new qe” hope, but markets are no where near any sustained selloff to justify any bail-out.