Don’t take yesterday’s market action as weakness because it wasn’t. Although the price action in the indices did not show strength the underlying breadth as measured in 52 week new highs and our % of stock over their 40 day moving average all held in there. Our Zweig sell signal is done now, it was a onetime event and will most likely not happen again for a very long time. I did make money short yesterday which hasn’t happened for a while.
My first chart today is the 40 day moving average. This chart shows the number of stocks on the NYSE that are above their 40 day moving average which sits now at 87.84 percent (Orange indicator). That is pretty strong. We have been using the crossing of this line with its 19 day moving average to generate a sell signal (that is what those stray pointing red arrows are about, sorry I should have taken those off), and you can see how far we are from a sell signal from this indicator.
Today, focus on the yellow arrows. Last OPEX Friday we had a thrust day which peaked our Orange indicator and began a sideways slide. This OPEX week on Wednesday we had the same type of thrust with identical indicator behavior followed by the next day with an setting of a new high and a failure to keep it, just like in August. Two days after the August thrust was almost the same type of day as the day before and that pattern could repeat today with a strong open that tests or sets the new high with a failure to hold it into the weekend.
Or if OPEX Friday’s repeat, we could get another strong thrust that puts us into another leg.
I am going to throw in the 10 day Highs-Lows chart in here:
Notice that yesterday we put in a lower value near that 1415 number. You can see that August OPEX + 2 the value was even lower while if we do get another thrust day we should early in the day see that we are building to surpass that 1415 so this is the underlying number to watch during that lunch time doldrums while the market pulls back to understand if we are returning to the new highs and a possible thrust close or are moving back to unchanged.
Two charts to watch today.
See you in the markets,
Marlin – aka RedlionTrader
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