Here is a daily chart showing the number of issues traded on the New York Stock Exchange which advance in price (black line) and the 10 day moving average of this number. Above the advancing issues chart you will see a daily bar chart of the Dow Jones Industrial average. I last commented on the advancing issues indicator here. On the advancing issues chart you can see a sequence of higher lows in the daily number and well as a steady advance in the 10 day moving average. Yet today the Dow has made a new low for the reaction from the July 16 high ( although the S&P 500 index has so far held above its corresponding low). This I believe is a very significant positive divergence in the averages, especially since the news about credit conditions is so gloomy.
I don't know whether the Dow has made its reaction low today or whether instead it will drop a little lower Monday. In either case I think the next move of any significance from current levels will be upward to new highs for the bull market.
4 comments:
"Yet today the Dow has made a new low for the reaction from the July 16 high ( although the S&P 500 index has so far held above its corresponding low). This I believe is a very significant positive divergence in the averages, especially since the news about credit conditions is so gloomy."
One small problem...NDX DID make a new reaction low today. And that the NASDAQ did not means to me that the rally that we get will NOT lead to new bull mkt highs but may top 8/8 high...a rally to be sold - a candy a** rally.
Follow-up to "...very significant positive divergence in the averages...":
Carl, i would agree with you about the coming rally IF the DJI was the only avg to make a new reaction low; but since the NDX "confirmed" the move down i think the coming rally will be a rally to be sold. And the Fed's moves will be taken as an admission that things are getting worse than believed to be the case.
Love your blog. Do you think the dow is showing a head and shoulders formation?
Hank
lets just buy this market... what are we saving it for anyway ?
Money Market is still not too atractive. Dow 14000 again in 2 weeks.
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