Reasons For & Against The Market Continuing Higher

This post is written with regard to the short term trend.

For the market going higher short term:

  • We have not repaired being oversold on several metrics. The two charts displayed below are of S&P stocks making 20-day lows and S&P stocks below their 50-day MA  Screen Shot 2014-08-12 at 12.36.33 PM Screen Shot 2014-08-12 at 12.36.58 PM
  • Since 2013 all small dips have been buying opportunities.
  • There was a huge spike in the NYSE equity put/call  ratio last week. Although it only lasted about a day, large spikes have often marked a bottom. Screen Shot 2014-08-12 at 12.41.28 PM
  • We recently had a full moon* (see note below)
  • Corporations, Institutions Buy the Dip, via Josh Brown and BAML.

Screen Shot 2014-08-12 at 12.52.15 PM

  • The Russel, which is typically emblematic of risk-on is staging a MACD cross to the upside and its 10-day MA (blue-line) is starting to flatten out after being down. Screen Shot 2014-08-12 at 4.24.19 PM
  • You want them to.
  • Short interest on SPY ticked up 2.3% according to the latest short interest update from 8/12.
  • Bonds (TLT) are down so far this week.
  • Europe is not making any meaningful dent in the recent selling despite now being severely oversold.
  • We have not seen any panic type of selling.

Against the market going higher short term:

  • Oversold can stay oversold and often does before a larger correction is going to take place.
  • We have not yet had an internal accumulation day based on the NYSE advance/decline ratio or the NYSE up/down volume.
  • We have not yet had an external accumulation day based on sheer volume.
  • Credit spreads are still signaling caution.
  • We recently had a full moon* (see note below)
  • We are seasonally in a weak period.
  • The Russel is struggling to get back above its 200-day MA for the second time this year (see above chart – red line).
  • BTD’ippers haven’t presented themselves in any meaningful way even at oversold levels.
  • You don’t want them to.
  • Based on recent performance, the VIX is staying relatively elevated.
  • FOMO (fear of missing out) has not presented itself in any meaningful way.
  • Financials, Industrials, and discretionary still remain under performers.
  • Transports aren’t jumping back over their their 50-day MA

*Come on, because “we recently had a full moon.” – Pffffff

No bias here from me. I will let you decide.

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