Wednesday, January 10, 2007
Here is a line chart which records the daily count of the number of issues traded on the New York Stock Exchange which advance in price. The pink line is the 5 day moving average of this number. I last commented on this indicator here.
You can see that a couple of days ago the 5 day moving average dropped to the light green line which indicates a moderately oversold condition. It is remarkable to me that after a three week decline this is the lowest level the 5 day moving average could reach. I think this is a sign of underlying strength and portends much higher prices ahead.
In any case note also that today the S&P made new reaction lows. But the daily count of the number of advancing issues remains above its recent low as does the 5 day moving average. This is a bullish divergence and gives me confidence that the low of the correction which began from the December 15 highs in the S&P has been seen.