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:
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.
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
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
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