$NYADV closed at 2699 when readings at or above 2500 indicate an extremely overbought market.
$NYAD, the daily reading, closed at 2341 when 1800 indicates extreme overbought.
$NYDNV closed at 46 when a reading around 150 would be considered very overbought situation.
93% of volume went into advancing issues giving us a 90% up day.
Based on the above, the market is now short term extremely overbought and after a day like today one has to expect a pause in the action for tomorrow. Also, we got a 90% up day today, but the volume, 2.5billion shares, is on the light side. Still, price is the only thing that pays so for now let’s just put the light volume aside. What I don’t want to see this week on light volume is a follow-through type day. For such a day to be legitimate, it shouldn’t come until at least Wednesday or Thursday and Friday would be better but we’ve got the holiday so next week would be best of all. But it’s not a perfect world.
While I believe the market has just put in a short term bottom, the possibility that the market has put in a major bottom can’t be ruled out. Every major bottom comes with all kinds of bad news and the bad news doesn’t just evaporate but lingers making it tough on Bulls & Bears alike. This capital gains tax increase could be trouble but for now the market seems to believe that Congress will come to the rescue of investors. While this is all getting sorted out, we have to see if the market can put in a series of higher lows and higher highs and establish a new uptrend. Shouldn’t take too long to figure out if today’s action has staying power or if it was just a mega short squeeze.
Daily chart of $SPX showing two congestion zones. These are places where $SPX stalled, had a chance to go higher, but headed south instead. These are areas where buyers failed to show up before so they’ll need to show up now or what happened today will end before it really has a chance to get started.
Also note on the chart the various ‘buy’ signals that were generated today. Still waiting for bullish crosses of MA’s but that will take several more days.
Be careful and GL