Stockspulled back this week, but the bigger trends remain up and the bulk of the evidence still favors the bulls. Three days of weakness does not a trend change make, especially when stocks were overbought to start the week. The NYSE AD Line remains in an uptrend, Net New Highs are positive overall and all nine Bullish Percent Indices are above 50%. Despite these positives, there are some concerns. The Nasdaq AD Volume Line formed a lower high and bearish divergence is working. There are fewer Net New Highs than in July. IWM and MDY failed to confirm recent highs in the other major index ETFs. Overall, I still think the bullish indications outweigh the bearish indications.
- AD Lines: Bullish. The Nasdaq AD Line turned sharply lower the last three days and has been flat since late May. The NYSE AD Line hit a new high earlier this week and remains in a clear uptrend.
- AD Volume Lines: Bullish. The Nasdaq AD Volume Line failed to take out its early July high and formed a bearish divergence. A break below the August low would be outright bearish. The NYSE AD Volume Line did take out its early July high and remains in an uptrend.
- Net New Highs: Bullish. Nasdaq Net New Highs were not as strong as they were in early July, even though the Nasdaq is within 100 points of its spring highs. NYSE Net New Highs remain positive, but they too are not as strong as in early July.
- Bullish Percent Indices: Bullish. All nine sector BPIs are above 50%.
- VIX/VXN: Bullish. The Nasdaq 100 Volatility Index ($VXN) and the CBOE Volatility Index ($VIX) surged this week, but remain at low levels overall and in downtrends.
- Trend-Structure: Bullish. DIA, OEF, QQQ and SPY hit new highs in August, but IWM and MDY fell short. Small-caps and mid-caps continue to show relative weakness and non-confirmations, but have yet to break key support from the early August lows.
- SPY Momentum: Bullish. MACD(5,35,5) and Aroon turned down this week, but remain well above zero and bullish overall. RSI hit 70 and pulled back.
- Offensive Sector Performance: Bullish. XLK was the only offensive sector to hit a new high this month. Nevertheless, XLI, XLY and XLF broke their July highs and these breakouts are holding so far.
- Nasdaq Performance: Bullish. The $COMPQ:$NYA ratio is back near its April high as the Nasdaq outperforms the NY Composite.
- Small-cap Performance: Bearish. The $RUT:$OEX bounced sharply in August, but remains in a downtrend since February.
- Breadth Charts (here) and Inter-market charts (here) have been updated.
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
About the author:
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
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