I haven’t been the most optimistic about the market as of late. I want to be, ask my wife, I hate negativity. It’s just very hard to look up when the market and various indicators look down. The things I can be positive about are some of the momentum indicators have shifted into oversold territory and now I’m just waiting for them to get out of being oversold before seeing an ‘all clear’ flag being flown. Selling volume has eased just a hair, nothing to get excited about but it’s something to watch this week. High beta stocks continue to plummet in comparison to the overall S&P index as traders continue their shift into lower-volatile sectors.
The chart below shows a short-term moving average of the number of advancing issues on the NYSE, as I’m sure you can guess without even scrolling down, it’s not pretty. When compared to past occurrences (orange line) of extremely low advancing issues, we haven’t been to this low level since August of last year, and before that it was May ’10, February ’09, and November ’08. These instances do not necessarily coincide with exact market bottoms but they seem to be present right before a bottom has occurred.
Next up is the U.S. dollar, which has reached a level of past resistance. With all the happenings of Europe it’s not a surprise to see investors seek safe haven in the dollar, it’s just a matter if buyers can push past this moat of resistance. The RSI indicator has also hit a level that we haven’t been to since 2010.
A falling knife-style market like we have been experiencing in May of this year normally slices right through moving averages like butter. And this has been the case so far with shorter-term MA’s. The next MA up (at least that I’m watching) is the 360-day. I’ve circled past touches of this moving average to show its relevance. It will come into play at the 1291 level. However, the futures market this morning has not given any respect to this price point (hitting 1287 during European trading).
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