Short term, the SP500 has been stabilizing in a range 1260- 1280
following the sharp drop from the early May interim high. Now at
the high end of this tight range, the market has moved up from
moderate oversold levels. My favorite indicators are headed toward
positive, and a break and hold above 1280 would turn the standard
MACD positive. That, in turn, might invite in some more money.
In quick review, the cyclical bull remains intact, reflecting trend
and the direction of the 40 and 69 week M/As. Six week measures of
the NYSE A/D line and market momentum are down but both have held
important support on a daily basis. The six week measure of internal
supply/demand is even-steven, but may tilt up some this week. The
market has been below its 13 week M/A for two weeks, and it could
easily stay down for another two based on experience in the current
bull campaign. The 14 week stochastic -- a good measure of bottoms --
is close to registering a full oversold. My 13 week momentum
oscillator has turned down, but it shows no break away yet. In sum,
there has been intermediate term damage, but no decisive break.
I had been expecting a sharper downward break in the "500" to the
1180 - 1200 area reflecting very strong overbought readings in the
leadership of the broad market and the period of extended breadth
and momentum compression that preceded the recent correction. The
market has failed to comply so far and is near a short term move
to the upside. I will likely wait a few days for confirming signs
before I would initiate a long position.
I plan to update on fundamentals in the next post.
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