NYAD NYSE Advance-Decline Daily Chart
The NYAD printed an uber low -2200 as a result of the Friday market collapse. Typically, however, when such a low reading is printed a bounce is needed for markets to relieve the overwhelming negativity. Note that last Wednesday the first low print occurred, then a modest intraday market recovery occurred on Thursday but it had no legs, then Friday markets stumbled lower again. Two items of interest. First, as the NYA dropped Wednesday thru Friday in price, the NYAD did not print a lower low (which means there was not a greater number of decliners) as the chart above shows. This is a subtle difference, about -2250 on Wednesday vesus -2200 on Friday. But this divergence hints that the selling is temporarily overdone since the decliners are not increasing with the lower price moves.
Second, the uber low -2200 readings on their own merit want to see a bounce in the broad indexes. In addition, the NYA is positively diverged on its daily chart which is another indication that a market bounce is needed. The bounce may simply provide a new short opportunity for markets. Of coure if bad European news occurs at any time, the markets will tank and the analysis above will be trumped. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
KS, it would be interesting to post the same chart during the 2008 decline. Global slowdown and contagion could produce similar. QE3 is great hope of bulls.
ReplyDeleteCombine this with the daily VIX at its upper BB and just about everything else we all look at gap down in most cases is why I backed the truck up on several 3x bull etfs w/ call options
ReplyDeleteMCAP, as with all statistical support/resistance levels, skewing becomes the rule the more they are relied on. I've seen fibs at all levels breached, whether by manipulation or skewing, triggering stops and/or bringing counts into doubt. I expect overshooting targets on both sides of trade, which is why extra patience is needed for entries. Also, we haven't see bottoming action yet...engulfing candles, no tails. Long over weekend, especially with 3x calls, takes more rocks than I have.
ReplyDeletefutures are bloody red! Looks like more selling tomorrow. GLTA...
ReplyDeleteI remember many buying the dips in 2008...all the way down. That will happen again. Best way to make money: sidlines until pos. divergences are confirmed with bottoming action. Don't like short here with prospect of the bernank coming out of his cave.
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