A funny thing happened on the way to the top this week.  The underlying market breadth has been going through a correction.  The signal that have served me so well during this bull run are once again setup to start firing “BUY” from a prolonged sell signal that saw no follow through price action to the downside. 

So do I buy the “BUY” signal?  Probably.  It hasn’t happened yet.  It is setup to happen on Friday during that runted session. I won’t go in heavy.  I will buy light on Friday if the signals hit and add into the market if they prove to be legitimate buy signals.  If we do start to fall off the signals will in-validate themselves fairly quickly so I need not be overly concerned about “being trapped”

Here is how the signals are setting up:

Zweig:

This never got to the oversold area.  I had a date of 11/30 set aside for the end of a downward leg followed by another thrust into the end of the year.   Instead we have been building up the A/D line in the last few days which has turned this indicator upside down.

NYSE 52 Week New Highs

Our 52 week new highs put in a higher bar but  not as high as two days ago and more importantly not as high as 5 days ago so this left the indicator still on the sell side.  Worthy to note however is that the hurdle bar for Friday is quite low so anything shy of a hard selloff should put this indicator into a buy mode.

% Above 40 DMA Index

This remains our most bullish indicator  Already on the buy side of the 20 DMA it is interesting to note that the 20 DMA is starting to curl up much like it did at the beginning of July.

10 Day High – Low

Still on a sell signal buy like some of the other indicators, the Friday hurdle seems pretty beatable.  A gap down opening with further selloff would keep us on sell but it very close to turning the other way.

We are building up another stack of new highs, or we could be still coming down from the last stack.  The way the math works out on this indicator a close with above 188 new highs today would issue a buy signal on the NYSE.  We already had one false flash on the RUT a couple of days ago.  In the event we don’t make the 188 today, Friday has to make 44 on its stunted day.  Next Monday would be a goal of 46.  So it is interesting that if this could confirm what we are seeing on the 40% DMA index we could get another buy signal before too long.

This indicator lately has not be performing well as we have rallied with market breadth weakness.  There is an underlying sell going on that is not reflected in indices.  (Maybe a flight to quality).  Currently they are setting up to issue a buy signal, perhaps into the closing today if we rally, but if Friday has any strength it should be in the Buy camp.

This is currently the most bullish of the indicators I am tracking.  I show a very similar setup to the July turn around in the breadth of the number of stocks trading above their 40 day moving average.