AT40 = 64.0% of stocks are trading above their respective 40-day moving averages (DMAs) – ended a 1-day overbought period
AT200 = 62.7% of stocks are trading above their respective 200DMAs
VIX = 11.7
Short-term Trading Call: bullish
Commentary
It figures that just one day after the stock market finally crossed into overbought territory, it dropped right back out in dramatic fashion.
AT40 (T2108), the percentage of stocks trading above their respective 40-day moving averages (DMAs), dropped from 70.01% to 64.0%. Before the S&P 500 (SPY) closed with a loss it rallied to a new intraday high in what seemed like another powerful follow-through of bullish sentiment. Instead, the index lost 0.4%. Once again, I found little use for the mainstream financial press’s search for explanations; even the hand-wringing over what was apparently the largest one-day reversal in almost a year rang hollow to me. For example, the S&P 500 did not even close below the low of the previous trading day. The index bounced slightly off that point of support. Once that low gives out, THEN I will start wondering about whether the index can crack the stock market finally crossed into overbought territory. Ditto on the Nasdaq and the PowerShares QQQ ETF (QQQ).
The S&P 500 (SPY) gapped higher from its all-time closing high but ended the day with a loss: a small gap and crap.
The Nasdaq followed right along with the S&P 500.
The PowerShares QQQ ETF (QQQ) followed right along with the Nasdaq but came far short of challenging the previous day’s intraday low or the close.
Small-caps suffered much greater damage. The iShares Russell 2000 ETF (IWM) closed below the low of the previous trading day and created a bearish engulfing pattern. The selling did not end until IWM tapped the bottom of its uptrending upper-Bollinger Band (BB) channel.
