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Point & Go Figure: Midweek Market Review

By

Can you wake me up when it's time?

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Short-term Overview:
The short-term conditions, extended and in high-risk areas, crossed the threshold to negative territory on the NYSE last week and the NASDAQ earlier this week. The percent of stocks above their 50-day moving average indicators for both the NYSE and Nasdaq are now negative, having reversed down from high-risk levels and crossing below 70%.

Meanwhile, according to figures from Investors Intelligence, the High-Low Index for the NYSE and the Nasdaq are both at extremes and have declined significantly since Monday, despite the more positive tenor to the day market, at least based on the broad indices, since last Friday's action. These indicators were pushing their highest levels since this past summer, while continuing to show a long-term divergence indicative of an important near-term top forming.

Intermediate Overview:
The Nasdaq-100 Bullish Percent
reversed down from above 70% and is now negative. The Dow Jones Industrial Average Bullish Percent has reversed down from 70% and is also now negative, while the S&P 500 Bullish Percent remains positive, but in high risk territory above 70%. It is important to understand that because the indices these bullish percents are comprised of are either capitalization-weighted, or in the case of the Dow price-weighted, the indices themselves can move based on a small group of stocks. What these bullish percent indices, which weight each stock in the indices equally, measure, is participation. Fewer stocks are participating in each rally.

Long-term Overview:
While the bullish percent charts for the NYSE and Nasdaq Composite remain in Xs, the pattern of lower highs (meaning diminishing breadth and participation) combined with their relative high risk level, continues to suggest we are closer to a conclusion of the cyclical rally that began in October 2002 than to the beginning of an important new leg higher. The reversal down in some of the short-term indicators has raised the risk that an important new leg down in the longer-term structural bear market is close to beginning.

Charts of Interest:
Nasdaq-100 (NDX) Bullish Percent
(Chart courtesy Dorsey Wright)

Nabors Industries (NBR)
(Chart courtesy Dorsey Wright)

Novellus Systems (NVLS)
(Chart courtesy Dorsey Wright)

Novellus Systems (NVLS)
(Chart courtesy Thomson Financial)

No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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