Buy and Sell Signals, Risk Analysis, Money Flow, Breadth, Momentum

Michael Pitre Has Had Over 50 Followers Rank: 20 Followers: 71 Votes: 90 Years Member: 11 Last Update: 18 January 2017, 19:53 Categories: Market Timing
Trend Analysis
Swing Trading

The risk indicators still favor stocks but we are in a sideways consolidation right now. This could last a while longer. There is always the potential for a correction of 3 to 5 percent but market internals have not yet shown deterioration which would point to that. Also support has been holding. From Argus Research...bond/stock mix indicators continue to favor stocks over bonds. Drilling deeper, the spread between the U.S. 10-year note and the S&P 500 dividend yield has been around 0.0% since 2012. That is the lowest since 1958. On earnings yields, the Moody's AAA yield is 3.90% vs. the S&P earnings yield of 5.46%. This spread is now -1.56%, and it has been at these levels or lower since 2009. In the previous 24 years, it traded mostly between 2% and 4%. Our bond/stock mix barometer favors stocks over bonds by 0.9 sigma (standard deviations), also a very favorable comparison for stocks on an historical basis. Since 1965, no major stock market peaks have occurred unless the B/S mix was over zero and the S&P 500 was overvalued by 8% to 20% - sometimes even more.

Meanwhile, MarketEdge.com Cycles are mostly bearish right now but all will turn bullish in late Jan / early Feb and that should last a while and help the market move higher.

The technical indicators are showing negative divergence for the DJIA and S&P 500 but are still positive for the NASDAQ. Internal breadth indicators are mixed with the NYSE Advance/Decline line, a leading indicator of market direction, posting a new high on Wednesday and Friday but the number of new 52-week highs vs. new lows for the NYSE and NASDAQ continues to contract, meaning the number of stocks participating to the upside is narrowing.
Even the sectors were mixed this week as gains in Consumer Discretionary (XLY), Technology (XLK), Materials (XLB) and Financial (XLF) were offset by losses in Energy (XLE), Consumer Staples (XLP) and Utilities (XLU). Only the Financial (XLF) and Technology (XLK) sectors moved to a new 52-week high this week.

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A Daily Chart of the major 'risk on' indexes.

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Sto 14 got down to the 2 level while the volume momentum oscillator at the bottom got to and extreme level...the market bounced. Looks like we are going down for
a retest of these extreme conditions. During the bull market usually the market made a substantial low after getting this oversold...but there are times where it
makes another test. This is going to tell us a lot about this market. What happens after a retest.

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Key Chart For Volume Analysis...This chart gives a good understanding of what internals look like from the up volume vs the down volume...has done well big picture

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