Tuesday, November 13, 2007

Advancing Issues

Here is a daily line chart of the number of issues traded on the New York Stock Exchange which advance in price (black line) and the 5 day moving average of this number (purple line). I last commented on this indicator here.

Notice the bullish divergence shown by the 5 day moving average and by the daily numbers during the past three days. Neither made new lows when the market averages did. Since the 10 and 20 day moving averages of the advancing issues number are both well into oversold territory and since this morning's low was above the mid-August low I conclude that the drop from the October 11 high is over.

Note that today's daily count of the number of advancing issues is higher than any of the past two months. I think this means that today's "outside day" is the kick-off for an extended advance which will carry the cash S&P above the 1600 level.

1 comment:

LowTax said...

Carl, love your blog. I do have to note though that we may see the same scenario as last July/August where the 5-day moving average of the advance decline line (purple line) re-tested its bottom in mid-August while the market made new lows. Another reason to think this might happen is one that you often mention: the current selloff does not have a typical 1-2-3 (down-up-down) 3-phase look. Most moves usually do in order to get a V-bottom. At the very least, we should see a W-bottom, thereby having a second chance to buy in.