Cumulative Volume Index, which is T2104 over at FreeStockCharts.com, moved up today while the $NYA dropped by nearly 15pts. This is positive divergence and a sign of underlying market strength.
Cumulative $NYAD also moved up today in another sign of positive divergence.
So here’s the situation as I see it. Zweig Breadth Thrust and 4wk New High/Low Ratio have both backed off a little from recent overbought readings, but things like $BPSPX remain in nose bleed territory. We could continue to consolidate, like we have the last two sessions which would allow breadth indicators to recycle lower, or we could rally hard and push deep into extreme overbought territory. For the latter to take place, all the markets need is some kind of catalyst. Hmm. Like maybe AAPL blowing the doors off estimates and adding better than $30 to its price in the AH.
Here’s what to watch for tomorrow:
A $TRIN reading at the close down in the .40 or .30 area.
A 90% up day. You can anticipate this by watching the Advancers vs Decliners. If Decliners get down around 200-300 and stay there at the close, then that will probably result in a 90% up day.
A closing P/C Ratio in the low .70 area and maybe even the .6x area. You can watch the intra-day P/C Ratio here which will help you anticipate the closing P/C Ratio.
The 60min charts of SPY, QQQ, IWM, & DIA to see if the RSI’s push above 70 in a sign of overboughtness.
The rest of the things that I watch aren’t updated until two hours after the close but if we see a mega rally off AAPL’s earnings then you’ll have to guess that things like $NYSI will give a climax signal with a reading above 70.
But for the market to top out here, we need to see as many ducks lined up in a row as possible. In the last week we’ve seen things like Zweig Breadth Thrust give extreme overbought readings, but ZBT is only one indicator and it needs to have more partners in this crime. Maybe we’ll get that tomorrow and maybe not.
Chart of $SPX with a Dragonfly Doji today, which is considered to be fairly reliable as a reversal candle. Who knows? Maybe that little candle will trump AAPL’s earnings.