Tuesday, May 22, 2012

NYAD NYSE Advance-Decline Line Daily Chart

The NYAD is a handy day-to-day indicator for trading. Typically, when you see uber low numbers under -2100 that indicates that markets are far too negative and a snap-back rally should occur. Conversely, when the NYAD prints an uber high number +2100 and higher that is far too positive and a snap-back market sell-off should occur.  About six days ago the uber low number (green circle) led the way to an intraday bounce and market buoyancy.  Then markets continued to drift lower and another uber low reading occurred last Thursday. This is when Keystone started bringing on some long positions. Friday the markets continued lower with a low -1800-ish number but not as low as Thursday. This reinforced the thought of a snap-back rally since not only did the low -2100 print occur on Thursday but a divergence occurs after Friday with the NYA printing lower lows in price but the NYAD did not drop as much on Friday. This tells you the negativity is slowing, but, there remains too much and a snap-back rally is needed.

The rally occurs yesterday and lo and behold, the skittish NYAD now leaped higher to print an uber high number above +2100. Therefore, now stay on guard for a snap-back sell move by the broad indexes to remove some of this bullish euphoria. Futures were green ovenight and drifted slightly red over the last few hours but are flat currently. It is surprising that the Japan downgrade news did not have more of an affect on markets, at least so far today.  Optimism is taking hold over a Europe agreement tomorrow as well as hints of more stimulus and infrastructure spending coming from China. Thus, considering the 30-minute chart posted last evening, perhaps a couple hours of flatish markets are on tap to start the day then watch to see if the high NYAD reading can create a selloff for the markets reversing some of yesterday's bullish move.  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.
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2 comments:

  1. WeaverMay 22, 2012 at 7:33 AM

    Perhaps a small selloff will begin after the 10:00 (eastern) Richmond Fed and housing numbers. By then, we may have slipped closer to the 1318 SPX level you predicted earlier. (I bet you some of the volatility products will look very enticing later in the week. It's amazing how fast complacency sets in.)

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  2. Keystone SpeculatorMay 22, 2012 at 8:03 AM

    Hello Weaver, your thoughts are very good, we shall see. One caveat, the 30-minute chart may need four or five candles to roll over so even if the 10 AM time is not a pivot point, the whole morning will be of interest, the first two or three hours of trading. Any news out of Europe or China will immediately move markets one way or the other. It's a mystery why the reaction is ho-hum to Japan's downgrade.

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