Market Internals 2013-08-16

Monthly update on market internals.

The current snapshot of S&P 500 3-Day Advance Issues, Tick16 Short Term + Long Term as of 2013 August 16 close.

Reading

1. Long Term Tick16 (yellow line) below neutral zone going sideway

2. Short Term Tick16 (red line) drifting around neutral zone

3. 3-Day Advance issues (green line) dropped down to oversold zone with S&P making new low together

Inference

a. #1 is mildly bearish

b. #2 points to indecision

c. #3 a short term bottom is in the making

Last update pretty much predicted exactly what S&P would do since mid-July:

– S&P drifted higher in multiple broken up swings

– took 2 to 3 weeks to produce the top

– a significant top is now in place

What we do not know at this point is whether this top is a major one or just a short term one. That all depends on the upcoming bounce staged by 3-Day Advance Issues at this point. If S&P can drop significantly more from the current level before Short Term Tick16 going oversold, it will be extremely difficult for S&P to recover from the selloff. Hence a long term top will be in place.

On the other hand, if S&P can hold its ground now and start to bounce, it will have a good chance to recover at least 50% of the selloff so far.

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