Ok a few threads observations before a long holiday weekend. Let's start with the stock market. I started the week pointing out the valid FTD and tested the waters. Action was so/so but net positive however some positive changes of character to point out...
For starters I'm a BIG believer in consistency in analysis and process. Lots of folks out there LOVE to grab stuff and meld it together just to fit their opinion. For example I was pointing this phenomenon out on @RealVision for the back half of 2021 saying trouble ahead...
As the % of stocks is a classic breadth indicator that was signaling a potential intermediate term top. Less bulls carrying the heard and the more pronounced it got the more obvious it became. @markminervini were both highlighting it and by the time late 21' rolled around...
we were very cautious. Ok lets look at the same indicator now. We see the exact opposite divergence as the Nasdaq was making new lows over the summer % of stocks didn't confirm and has been diverging the other way. This is a potential sign of a bottom...
The other thing I like to look for is character change(s). Nasdaq this week has shown the most positive cluster in terms of volume to the upside since the beginning of the bear market in Nov 21', a mild positive but a positive nonetheless and best volume action we've seen...
The Russell 2000 is even better as I've been talking about the declining 200 day keeping a lid on this bear it had its strongest close above the declining 200-day since the start of the bear and volume also quite constructive & this is a larger subset of stocks even better sign..
Now what are the keys to watch for going forward.
1. Meaningful distribution, this would be a major negative and pullbacks overall should probably be contained to mid-high single digits on a % basis.
1. Meaningful distribution, this would be a major negative and pullbacks overall should probably be contained to mid-high single digits on a % basis.
2. Stocks and new leadership to start breaking out of bases. Haven't seen a ton of new ideas really exploding higher yet but this usually takes time. In the 2020 example there weren't a ton of ideas right away, it really took 3-6 weeks before it was obvious...
3. A continued overbought condition or 'lock out' rally would be best case scenario combined with continued skepticism. The best thing a market can do is stay overbought, and even better would be for 90% of stocks on NYSE & Nasdaq to be above their 50-day, if that happens...
It's like a double barrel breadth thrust (I just made that up so you heard it hear first) where one confirms the other. That's enough on the general market for now. I can feel a HUGE rant coming about whom you should trust/listen to when it comes to markets, perhaps next week.
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