As deep as this week's decline has been, it was not enough to turn the position table net negative. The AD Lines and AD Volume Line were hit, but remain in uptrends and well above their February lows. Most of the Bullish Percent Indices are still above 50%. Net New Highs turned negative for the first time since February, but the 10-day SMA of Net New Highs has yet to turn negative. After the extraordinary advance from February to April, the market is entitled to a pullback or correction. We saw pullbacks in June-July, January-February and now May. Sure, one will ultimately go too far and reverse the uptrend that has been in place for over a year, but I have yet to see enough bearish evidence to warrant such a reversal at this moment. Don't forget to review the table rational at the end of this commentary. Details after the jump.
- AD Lines: Bullish. The AD Lines declined sharply over the last few days, but the overall trend remains up because both remain well above the trendlines extending up from the November lows.
- AD Volume Lines: Bullish. The AD Volume Lines remain above the trendlines extending up from the November lows and well above the February lows.
- Net New Highs: Bullish. Net New Highs turned negative for the Nasdaq and NYSE, but the 10-day SMA of Net New Highs remains positive and the cumulative Net New Highs line remains above its 10-day SMA.
- Bullish Percent Indices: Bullish. Three of the nine sector Bullish Percent Indices are below 50% (energy, materials and healthcare). The other six are above 50% as are the Bullish Percent Indices for the major indices. Of note, the S&P 100 Bullish Percent Index is at 53%.
- Fear Index: Bearish. The S&P 500 Volatility Index ($VIX) and Nasdaq 100 Volatility Index ($VXN) both surged and broke above their October 2009 highs.
- Trend Structure: Bullish. The major index ETFs all recorded new 52-week highs in April and have now retraced 50-62% of the February-April advance. We have yet to see a lower low or definitive trend change.
- SPY Momentum: Bearish. The Aroon Oscillator moved below -50. MACD (5,35,5) moved into negative territory. RSI broke below 50.
- Offensive Sector Performance: Neutral. The technology and consumer discretionary sectors held up relatively well over the last two weeks. Most of the weakness came from the materials, energy and finance sectors.
- Nasdaq Performance: Bullish. The Nasdaq continues to hold up better than the NY Composite.
- Small-caps Performance: Bullish. The Russell 2000 led the way lower over the last two weeks, but has been leading the way higher since early February. It could still be a mere correction.
This table is designed to offer an objective look at current market conditions. It does not aim to pick tops or bottoms. Instead, it seeks to identify noticeable shifts in buying and selling pressure. With 10 indicator groups, the medium-term evidence is unlikely to change drastically overnight. The evidence was bullish from early September until late January. The Jan-Feb decline was enough to turn the evidence bearish on February 5th, but this decline turned out to be a correction and the evidence turned bullish again on March 5th. It is not immune to whipsaws.
