Market Internals 2013-08-16

By Lawrence

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.

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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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