Wednesday, June 17, 2009
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.