Technical Market Report
The good news is:
• All of the intermediate term indicators are still moving sharply upward.
Not much has changed since last week, the market is still overbought and there is still no volume to get excited about. My unscientific evaluation of sentiment leads me to think it is pretty bearish. I have seen a lot of reminders that September is the worst month for stocks, rising interest rates are bad for stocks etc. However, there is still no evidence the market is ready to capitulate.
The chart below shows the NASDAQ composite in red and an indicator of momentum of a ratio of NASDAQ advancing issues and declining issues in purple. In two out of three instances this year the indicator has declined ahead of prices and in April, when it failed to decline ahead of the price decline, it was not as high as it is now or as high as it was the other two times that it worked.
The chart below shows the NASDAQ composite and one of my favorite short term indicators, a 10% trend (19 day EMA) of NASDAQ new highs. The indicator does a nice job of smoothing out the day to day fluctuations in prices. NASDAQ new highs increased and indicator moved upward Friday in spite of the decline in prices.
The last chart shows summation indices calculated from NASDAQ advances and declines, new highs and new lows and upside and downside volume. It is imprudent to bet against these indicators when they are all moving in the same direction and they are all moving sharply upward.
September is the worst month for stocks, however, it is the last half of September that gives it its bad reputation. I do not have a means of generating tables for the week after Labor Day, but looking through the data, it appears there is usually little movement during that period.
I expect the major indices to be higher on Friday September 10 than they were on Friday September 3.
Gordon Harms produces a Power Point presentation (PPT) that is the basis for discussion at our local FastTrack user group meeting. You can download his September PPT at: http://www.guaranteed-profits.com.