Tuesday, November 28, 2006

Advancing Issues


Here is a line chart showing the daily count of the number of issues traded on the New York Stock Exchange that advance in price (black line) as well as the 5 day moving average of this number (purple line). I last commented on this indicator here.

At last week's top the 5 day moving average was higher than it had been in 10 weeks and this is one reason why I don't think that the market made an important top last week. I think we shall see this moving average drop this week to the light green horizontal line indicating a moderately oversold condition which typically ends 4-6 trading day reactions. On the day of the reaction low later this week I expect to see the daily count (black line) stay above the low it reached yesterday. Coupled with a moderately oversold condition in the 5 day moving average this will be a modest bullish divergence.

After this divergence develops I think we shall see the S&P futures rally to 1418-20.

3 comments:

Anonymous said...

I guess you are also waiting for a negative divergence onthe 5-day average to give you a sell signal?

i.e. the next 5-day top shd be LOWER than last week's (combined with a higher price)

Peter Nowalsky
Concorde N.H.

Anonymous said...

Hi, I just discovered your blog. Awesome work. I was wondering what do you look for in your 5 day moving average chart to signal a possible top.

Thanks in advance.
Kevin

Anonymous said...

it will be crucial to see the level of the next top, if inferior to the previous one is the final divergence for a medium term correction.
Cya and Keep Up The Good Work , you're making a difference

Alberto