Wednesday, June 17, 2009

Advancing issues



I haven't commented on the advancing issues numbers in a while but I think they are sending an interesting message here. The charts you see above are constructed from the daily counts of the number of issues traded daily on the New York Stock Exchange that advance in price each day. The come courtesy of StockCharts.com. You can follow them in real time by clicking on the "My Chart List" link on the right hand side of this blog.

The black line is the daily count of advancing issues. You can see that for the past two days it has been rising even as the market averages have been falling. This is bullish behavior. This bullish action is much more significant when it occurs in the context of clear oversold conditions. The pink line is the 5 day moving average and the red line the 10 day moving average of the advancing issues numbers. Both have dropped to the solid green horizontal line which is the level from which good rallies in a bull market typically start.

These bullish indications from the advancing issues numbers have to be interpreted in a broader context. The market has dropped about 55 points from its top last week, thus matching the length of the biggest break on the way up from the March '09 low. It has dropped to strong midpoint support at 903. There has been so sign of a supply shock. For all these reasons I think the up trend from the March lows has further to go.

For these reasons I think that the e-minis are about to begin a stronger rally than we have seen in two months - a rally that will be at least 75 points in length and which may extend upward 10o points or more.

12 comments:

Kishore said...

It is interesting to see how our thinking can be corrupted by all the noise in the news and the blog media and the "fundamentals".

Even though we may be in a upward corection to the waterfall drop to ES at 666, the upward correction is far from over.

The DMI 14 indicator even on the weekly charts is showing an uptrend. The daily charts could not show a more powerful uptrend than they have been showing, unless a major support, at least the 40 day EMA, is broken.

So, where is all the bearishness coming from? It is definitely NOT coming from the charts. It is coming from a "disease" called top-guessing.

Laurence said...

Declining issues are still outweighing those on the upside even after market rally.

Jim said...

Carl
Impressive argument and nice quick trade!

Aarpenn said...

Carl,

I recently came across your blog, about a week ago. I have been reading your blog pretty regularly, and have traded based on your comments. I did make some money. More important, you have been fairly accurate on predicting the direction so far. I want to thank you for your valuable expertise.

Raj

Ken said...

Setting up a Twiiter feed will draw more people to your blogs and sell more books. please consider as your posts are often timely and it will be easier to follow.

janet said...

I love your bullish stance...but I can't shake feeling we are going lower first. At least 875 seems likely to me. A rejection at the 950 level seemed very definitive to be such a shallow correction.

Market Karma said...

I agree with Mr. Carl Future on these markets. SPY and QQQQ have now reached my downside targets of 91.10 and 34.80 respectively as stated here

http://marketkarma.blogspot.com/2009/06/volatility-reversion-15-jun-2009.html

And the volatility signal is still in force which means Carl's larger than before move higher, by 100 spu's points, would do the trick. Longer term I am targeting Nasdaq comp 3600. I am also on the watch for 10y yields reaching 3.36% as found here:

http://marketkarma.blogspot.com/2009/06/bond-market-update-jun-16-2009.html

Narayana said...

What about the huge divergence on the way up? Price made new highs whereas the advancing issues m/a could not. Normally, you'd interpret that as bearish, no?

John M said...

To Narayana's point, I think technical indicators can often be interpreted either way depending on one's bias. That said, who the person is that's doing the interpreting makes a big difference. The time frame being discussed is also an important consideration.

Carl has been around for quite a while and compiled a pretty darn good track record. Unlike many others, he is also quick to revise his outlook when he sees something significant that doesn't jibe with his current view.

Bottom line: always consider the source. You may have a different interpretation or opinion, but that doesn't negate the credibility of a proven veteran.

2cents said...

Carl,

If you only use advancing issues without taking into consideration declining issues and their correlation your argument seems onesided.

2c

Win said...

c - I disagree. Just looking advancing issues is just as good as taking the AD line or ratio.

A simple example (that ignores unchanged issues):
There are 10 issues.
Monday 6 advance 4 decline
Tuesday 5 advance 5 decline
Wednesday 4 advance 6 decline

See what I mean? As long as the total number of issues is constant, and there is a very small, fixed number of categories, taking just one of the categories gives as good an indicator as taking a ratio.

2cents said...

Win,

I think you must be kidding...using your example you only show advance issues decreasing and decline issues increasing and has done nothing to the total effect on the market, take for example, if you take the difference you've got 2,0,-2 which is much more severe decline than 0.1 decline for the advance issues each step...

2c