Here's the Next Short-Term Edge...

The market put in a mixed performance today on weak volume.  The intermediate-term technical picture is becoming more and more dicey.  The Dow, S&P 500, and Nasdaq are all trading below their 50-day moving averages.  Breadth was positive today, but the chart below shows that is has been steadily declining since peaking on January 9^th.  The red line plots each day’s NYSE Advancers/(Advancers+Decliners).  The blue line is a 10-day exponential moving average of the red line.

Friday saw the 10-day exponential moving average hit a recent low.  This chart illustrates the fact that less and less stocks are moving higher.  Internals are starting to deteriorate.

In going through my charts over the weekend I found a remarkably small number of new stocks near completion of basing formations.  This can be an indication that bounces will continue to be weak.

Short-term, the market is a bit oversold.  It would be prudent to wait for a bounce before aggressively shorting.  If you’re looking to play the bounce and start scaling into some long positions, QQQQ is fairly extended and could bounce nicely should the market begin to rebound.  Start small, though.  Although somewhat extended, a bit more selling is needed before I would anticipate seeing a truly sizable short-term edge.

Bottom line is the market remains stuck in a range.  Support lies at 1259 (and then 1245) for the S&P 500, and 2241 (and then 2190) for the Nasdaq.  Breaks of these levels on volume would indicate an intermediate-term decline may be in the works.  Short-term, we’re a bit oversold.  No huge advantage either way right now.  I still suggest trading with a neutral bias until a significant edge appears.

Best of luck with your trading,

Rob

RobHanna@Comcast.net