Stocks simply continue to march higher. Buying pressure may be waning, but it is still outpacing selling pressure. The Nasdaq and NYSE AD Lines and AD Volume Lines hit new highs. Net New Highs surged in October and four of the five major index ETFs recorded 52-week highs this month. DIA is the only one that did not. Once again, the only market negative is actually a positive. Stocks are short-term overbought after a strong advance the last few weeks. However, it takes strong buying pressure to create overbought conditions.
- AD Lines: Bullish. The Nasdaq AD Line hit a new high in mid October and remains in a strong uptrend. The NYSE AD Line finally broke its summer highs to confirm the new high in the NY Composite.
- AD Volume Lines: Bullish. The Nasdaq AD Volume Line hit a new high in mid October and remains in a strong uptrend. The NYSE AD Volume Line edged above its September high to hit a new high in October.
- Net New Highs: Bullish. Net New Highs on both the Nasdaq and the NYSE surged this month and the cumulative High-Low Lines moved to new highs.
- Bullish Percent Indices: Bullish. All nine sector Bullish Percent Indices are above 50%.
- VIX/VXN: Bullish. The S&P 500 Volatility Index ($VIX) and the Nasdaq 100 Volatility Index ($VXN) fell back towards their 2013 lows. Both remain range bound for the entire year.
- Trend-Structure: Bullish. SPY, MDY, IWM and QQQ hit new highs in mid October. DIA remains below its September high and is lagging.
- SPY Momentum: Bullish. RSI bounced off the 40-50 zone and MACD (5,35,5) turned up near the zero line in early October. The Aroon Oscillator turned up, but has yet to exceed +50 to turn bullish again. Two of the three are bullish though.
- Offensive Sector Performance: Bullish. All four offensive sectors hit new highs this month (XLK, XLF, XLI and XLY).
- Nasdaq Performance: Bullish. The $COMPQ:$NYA ratio is in an uptrend, but remains below its early October high as the Nasdaq lagged a little over the last two weeks.
- Small-cap Performance: Bullish. The $RUT:$OEX ratio is in an uptrend, but remains below its early October high as small-caps lagged a little over the last two weeks.
- Breadth charts (here) and intermarket charts (here) have been updated.
This table is designed to offer an objective look at current market conditions. It does not aim to pick tops or bottoms. Instead, it seeks to identify noticeable shifts in buying and selling pressure.
This commentary and charts-of-interest are designed to stimulate thinking. This analysis is
not a recommendation to buy, sell, hold or sell short any security (stock ETF or otherwise).
We all need to think for ourselves when it comes to trading our own accounts. First, it is
the only way to really learn. Second, we are the only ones responsible for our decisions.
Think of these charts as food for further analysis. Before making a trade, it is important
to have a plan. Plan the trade and trade the plan. Among other things, this includes setting
a trigger level, a target area and a stop-loss level. It is also important to plan for three
possible price movements: advance, decline or sideways. Have a plan for all three scenarios
BEFORE making the trade. Consider possible holding times. And finally, look at overall market
conditions and sector/industry performance.
