You are looking at the highway and see a car moving swiftly, efficiently, and smoothly down the road. You think in my youngest son's vernacular and say, "Wow, that's a sweet car".
After going two hundred feet down the road, the car backfires, sputters, and stops.
He couldn't see what was really important ... what was going on under the hood.
Monitoring what is going on "under the hood" gives you the feedback you need to assess the safety and condition of a car. The stock market is the same way ... it needs monitoring of "underlying fundamental conditions" in order to assess its condition.
Below is a sample of our "Daily assessment of Underlying stock market conditions."
It is a simple, color coded matrix, showing the change of 9 important "under the hood" conditions about the stock market. Strong and safe market rallies have "Green" conditions. Red conditions are Negative, and Yellow conditions are Neutral.
Every day we post and email this chart along with our market commentary to paid subscribers. It shows the conditions over the past 3 days so that an investor can quickly see the current "change in conditions" with one quick glance ... just by observing the change in colors.
Here are the Underlying Market Conditions as of the close yesterday: We had 3 negative readings, 2 lesser negative readings, 4 Neutral readings, 0 Positive readings, and 0 Lesser Positive readings.
Conclusion: Underlying conditions showed improvement yesterday. Improvement, but no signs of emerging "Green conditions" yet. For day traders, that tells them that the intra-day bias is moving toward the upside, so intra-day shorting is out. For longer term investors, it says that overall market-supportive conditions remain weak and with no emerging green conditions to support a prudent case for any sustainable upside rally.
Today's chart is provided as a courtesy "look and see" for our free members. This is the first time that we have posted this chart on the free site and it won't be reposted here until May or June.
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| color code | positive | negative | neutral | |
| color code | slightly positive | slightly negative | ||
| Condition Wanted | Friday's Close - Jan. 23rd. Condition: | Monday's Close - Jan. 26th. Condition: | Tuesday's Close - Jan. 27th. Condition: | |
| 1. Very Strong to Strong Stock Ratios | Leader Ratio higher than Broad Market Ratio | Very Strong Ratio is slightly lower than the Strong Ratio, and both are in negative territory. | Very Strong Ratio is slightly lower than the Strong Ratio, and both are in negative territory. | Very Strong Ratio is slightly lower than the Strong Ratio, and both are in negative territory. |
| 2. Leadership Stock Ratio | Positive (Above zero) | Low Negative on low strength. | Low Negative on low strength. | Low Positive on low strength. |
| 3. New Highs Trender | Above 180 | At 1.6 ... 178.4 | At 1.8 ... 178.2 | At 2.9 ... 177.9 |
| 4. New Highs Raw Data | Above 100 | At 1 ... below 100. | At 2 ... below 100. | At 4 ... below 100. |
| 5. New Lows | Below 28 | At 122 (28 or less wanted) C-RSI remains Negative. | At 36 (28 or less wanted) C-RSI remains Negative. | At 23 (28 or less wanted) C-RSI remains Negative. |
| 6. Institutional Buying/Selling Trending | Accumulation | Institutions on 9th. day of Distribution. Distribution levels are decreasing. | Institutions on 10th. day of Distribution. Distribution levels are decreasing. | Institutions on 11th. day of Distribution. Distribution levels are decreasing. |
| 7. Raw "NET" Institutional Buy/Sell | Accumulation | Institutions were in Distribution on raw data. | Institutions were in Distribution on raw data. | Institutions were in lessening Distribution on raw data. |
| 8. Long Term Liquidity Inflows | Expansion | Liquidity Inflows are in Contraction with a small up tick. | Liquidity Inflows are in Contraction with a small up tick. | Liquidity Inflows are in Contraction with a small up tick. |
| 9. Hourly VIX vs. SPY | VIX below support | VIX sitting on support. | VIX slightly below support. | VIX slightly below support. |
