AT40 = 11.9% of stocks are trading above their respective 40-day moving averages (DMAs) – (as high as 15.6%) 9th day of oversold period following 4-day oversold period
AT200 = 25.4% of stocks are trading above their respective 200DMAs (as high as 29.3%)
VIX = 24.7 (as high as 27.9)
Short-term Trading Call: bullish
Commentary
The trading day started off well but ended in a calamity as sellers took over up to the last 15 minutes or so of the close. As a result of another day of yo-yo trading action, I was expecting to see AT40 (T2108), the percentage of stocks trading above their respective 40-day moving averages (DMAs), close lower and present a new intraday low for this oversold period. Instead, I was pleasantly surprised to see AT40 held onto a GAIN for the day and closed up 2 percentage points. This pop delivered a bullish divergence from the S&P 500 (SPY) which lost another 0.7% on the day and closed near a fresh 6-month low. The intraday low got dangerously close to 2018’s closing low.
The S&P 500 (SPY) rallied as much as 1.8% before fading all the way back to a loss of 0.6% on the day.
The NASDAQ and the Invesco QQQ Trust (QQQ) also lost on the day after initially strong rallies and steep intraday lows. Like the S&P 500, the NASDAQ got dangerously close to its closing lows of the year.
The NASDAQ lost 1.6% after gapping up as high as 1.5%. The tech-laden index closed at a new 6-month low.
The Invesco QQQ Trust (QQQ) lost 2.1% after ranging from $169 to $160 on the day.
The volatility index, the VIX, also experienced a wide range on the day. Most importantly, it faded from an intraday high that fell back from the intraday high of the previous oversold period. (The horizontal line marks the intraday high of the VIX in 2012).
Despite another yo-yo day, the volatility index closed essentially flat for the second straight day.
Adding a bit to my optimism over the bullish divergence is a very strong bounce in the Australian dollar (FXA) versus the Japanese yen (JPY) at the time of writing. This move creates its own bullish divergence with the stock market. AUD/JPY is trading right at 80 and a 6-day high. This strength augurs well for Tuesday’s trading at a minimum.
