Thursday, January 19, 2012

Stock Market Update

There are some notable data points from today's session.

The total put/call volume came in a 0.70 which is the lowest reading since the May 2011 market top other than one day in mid July just before the markets topped out and fell hard.

The equity put/call volume came in at 0.47 which is the lowest reading since the May 2011 top.  Both of these data points suggest extreme optimism in the market right now and that the market is likely to experience a correction soon. 

So IF we are still in a range or downtrend mode, an intermediate high is very near.  The other time that we see data like this is a few weeks after the start of a major leg up.  In those cases any pullback only last a couple days and lead to trending moves higher.

The 14 day RSI on the QQQ poked above 70 today.  And it is at 69 on the SPY.  Non-trending moves typically end VERY soon after these extreme readings.  Trending moves again experience brief pullbacks and continue to trend up.

The SPX touched its 78.6% retracement level of the May-Oct decline today.  This is a common extreme retracement level for counter trend moves.  The markets are at, or a tiny bit below, the upper daily bollinger band meaning the move is stretched to the upside.  Again either an intermediate high is likely to form, or a small pullback and break to new highs will be a sign of a continuation.

The daily ADX line has turned up and is right above 20 now suggesting a new uptrend is at hand.  So we do have this suggesting a likely new up trending move.

My take is that this move is likely to continue upwards.  But if not then I think it only has a day or so left before we have seen the price highs basically in place before a sizable correction.

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