With a number of upgrades, the indicator summary turned positive this week. I am, however, concerned, that this positive switch could be short-lived because some key sectors are lagging and the AD Volume Lines have yet to turn bullish. Also note that the advance since June is looking like a rising wedge or ABC corrective pattern. On the bullish side, the NYSE AD Line hit a 52-week high and Net New Highs surged this past week. Small-cap performance also picked up as the $RUT:$OEX ratio broke out. Seven of the nine sector BPIs are above 50%. Today could be the make-or-break day for this five week rally as the employment report looms. A positive turn in the indicator summary is not a roaring buy signal. It simply means that the bulk of the evidence is currently bullish. It says nothing about the reward-to-risk ratio for new long positions. A pullback or corrective period is required to improve the reward-to-risk ratio.
- AD Lines: Neutral. The Nasdaq AD Line is in a medium-term downtrend since March, but a short-term uptrend since early June. The NYSE AD Line surged to a new high this month and shows exceptional strength.
- AD Volume Lines: Bearish. The NYSE and Nasdaq AD Volume Lines surged back to their May support breaks with big moves the last five weeks. This is the moment-of-truth. They either push through and breakout to turn bullish or fail at resistance to remain bearish.
- Net New Highs: Bullish. Nasdaq Net New Highs surged to their highest levels since March and the cumulative line turned sharply higher over the past week. NYSE Net New Highs surged to their highest level since February and the cumulative line hit a new 52-week high.
- Bullish Percent Indices: Bullish. Seven of the nine BPIs are above 50%. Only the Technology Bullish% Index ($BPINFO) and Energy Bullish% Index ($BPENER) are below 50. Both, however, are above 47% and it would not take much to push them above 50%.
- VIX/VXN: Bullish. The S&P 500 Volatility Index ($VIX) and the Nasdaq 100 Volatility Index ($VXN) have been trending lower since early June and both are below 20%. Low volatility is bullish for stocks. A surge above 20% would put them back in bear mode.
- Trend-Structure: Neutral. DIA, IWM, MDY, QQQ and SPY surged above their May support breaks the last five weeks. Is this a correction within a bigger downtrend or the start of a new up leg? I am still treating this as a correction within a bigger downtrend.
- SPY Momentum: Bullish. MACD(5,35,5) moved above its May-June highs and Aroon is trading at 100 to show some serious strength. RSI broke above 60 this week.
- Offensive Sector Performance: Bearish. The consumer discretionary and technology sectors are lagging the S&P 500 over the last five weeks. The finance sector is outperforming on a percentage basis, but has yet to exceed its May support break. The industrials sector also remains below its May support break.
- Nasdaq Performance: Bullish. The $COMPQ:$NYA ratio has been flat since late March, but is holding its gains and remains above support from the April low.
- Small-cap Performance: Bullish. The $RUT:$OEX ratio surged to its highest level since March as small-caps outperformed large-caps over the last three weeks.
- Breadth Charts (here) and Inter-market charts (here) have been updated.
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.
Previous turns include:
Positive on 6-July-12
Negative on 18-May-12
Positive on 30-December-11
Negative on 16-December-11
Positive on 3-December-11
Negative on 23-November-11
Positive on 28-October-11
Negative on 5-August-11
Neutral on 29-Jul-11
Positive on 30-Jun-11
Negative on 17-Jun-11
Positive on 25-Mar-11
Negative on 18-Mar-11
Positive on 3-Sep-10
Negative on 13-Aug-10
Positive on 6-Aug-10
Negative on 24-Jun-10
Positive on 18-Jun-10
Negative on 11-Jun-10
Positive on 5-March-10
Negative on 5-Feb-10
Positive on 11-Sept-09
