Speculation is all about anticipating changes. That's why I never have anything good to say about commentators who specialize in predicting the past. You just can't make any money doing that unless you are a market commentator yourself!
With this in mind let's take another look at the divergence I discussed yesterday in the the advancing issues data for the New York Stock Exchange.
The daily chart above this post shows the daily number of NYSE advancing issues (in black) and the 5 day moving average of this number (in red). The S&P 500 cash and futures made new reaction lows today. On the other hand the daily count of advancing issues looks like it is making a second consecutive higher low and the 5 day moving average is still above the lowest point it reached during this reaction. This is a clue that the market averages are about to turn upward.
Of course it could happen that we see new weakness tomorrow or Monday, enough weakness to destroy this divergence. But the S&P futures are trading near the bottom of their box and I think the bigger trend is upward for reasons I have repeated many times on this blog. So we are in a situation where it makes sense to anticipate an upturn in the market, relying on the evidence the divergence offers us, instead of waiting for the upswing to get well underway before recognize it.
Success in speculation comes to those who correctly anticipate upcoming market trends. Let's see how this attempt works out!
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