So after Monday’s big flush that I was sure was going to be followed by even more selling pressure, buyers returned and came to the rescue. Tuesday and Wednesday prices held the line and we never got the sell signal. Then comes Thursday and Friday and sellers gave up and buyers took over. At the close of the bell Thursday a new pivot low was formed. If we were talking about an individual stock, this is a buy signal of sorts as long as the following day prices hold or continue higher. Friday we got just that, prices continued up and out of the pits of hell. So where are we now?
Starting from the highest point on Wednesday bar, we count backward day by day 3 times to a higher bar each time. We end up at January 31 @ $1794. At the close Friday we took out that point, so as long as prices hold there Monday or go higher, you could use this as a buy or re-entry. The green horizontal line that I have drawn from 1/30/14 @ $1799 is from the last pivot high. We need to also take this level out and close above it. If we can do that Monday, we have little more confirmation. So I’m starting to feel a little better about the the reversal being real. Can I find anything else to help me? Ok, below I will show 4 more charts that I normally do not show here but they might help a bit.
Above what is shown is the percent of stocks on the NYSE that are above the 200 day moving average. Having more than 60% above that level is bullish. Currently there are 64% above that level. This is good.
The percent of stocks in the S&P 100 that are above the 200 day moving average. Bullish is consider more than 65% are above the 200 day. Currently 74% and rising. This is good.
This is the chart that I like the most for the Bullish and Bearish signals. Percent of stocks above the 150 day moving average on the S&P 100. If we are above 65%, it’s a bull and below 50% it is consider bearish. You can see that twice in the last few weeks we had bearish signals but they didn’t hold for more than a day. Currently we are still below the bullish signal at 63%, so we are in no man’s land at the moment. So this is still a work in progress, but close to a buy.
This last signal I just recently learned from the Option Addict or Jeff Kohler at www.ibankcoin.com. It is define like so: A market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. It is primarily used for short and intermediate term trading. So the chart above means that a close above zero and climbing is a bullish signal.
So does all this mean the selling is over and it’s party time? No, this means we watch with caution the next few days and see if if prices hold and continue the climb out. I do fear a reversal to the downside could led to desperation selling and it would be free for all. So it is very important the prices either churn sideways or start climbing. Slower the climb the better.
The Small Cap is still recovering from the steep losses from the highs in January. The price pattern here is almost identical as the S&P 500 but not quite as safe. Price bounced right on the bottom uptrend line and did a full reversal creating a new pivot low. We managed to get back above the last major support area and closed equal to the 50 day moving average. The horizontal green line is the count back line using the 3 day method, and we have not taken that point out yet. Just above that is the last pivot high and that hasn’t been taken out yet. So I’m very cautious here until I see prices break above those last two levels.
The International Index also came screaming back hard last week and was the winner of the week at 2.37%. I would have liked to have banked that gain but I was out of the I-fund. This single index was enough to drive all the L-funds into positive territory. The index itself did create a new pivot low and did close above the count back line to the plus side. We are still below the 50 day moving average and well below the last pivot high. So there is a lot of work to still do here in order for me to feel like dipping my toe in. Consider this a watch also.
There is really nothing to say here on bonds except if you in, stay in. The chart still looks good to me.
Conclusion: I think we might be out of the woods for the moment but I will not be able to tell until the markets open Monday morning. Sit back and watch show is on the menu and let’s hope all the indicators of a reversal are right. Enjoy the rest of the weekend.
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