I'm not going to go in to too much detail of the near term charts as I already covered that late Friday, it looks like Tech is set to take over rotation from financials, this is exactly the same as the previous bounce move. As I think I showed in the volatility post, volatility is getting incredible, we have the biggest 2 day gain of the entire year and the biggest weekly loss of the year in the same week.
What I do want to bring to your attention as I find these charts really indicative of the market's condition, which as you now I have been saying it has been deteriorating badly, selling any strength, is an update of the breadth charts.
There's no ambiguity to these charts, these are pure math, pure numbers, there's no opinion, there's no maybe.
We've been following the breadth charts for some time, the divergences started a while ago, but now they are so bad, I don't see how this market can recover from these. The indicator is in green, the comparison is the SPX (red) except for the NASDAQ composite A/D chart.
This is the percentage of all NYSE stocks that are 1 standard deviation above their 40 day moving average. Around Feb. this indicator peaked at 78.50%, it is now 11.40%, lower than the October lows with price significantly higher, this is exceptionally shallow market breadth, in essence, the market is a thin, hollow shell.
Percentage of all stocks simply trading above their 40 day moving average, this peaked over 85% and is now at 28%, ONLY 28% OF ALL NYSE STOCKS ARE ABOVE THEIR 40 DAY MA! Again, lower than the October lows!
Stocks trading 1 standard deviation BELOW their 40 day average was well below 10%, now near 50%.
Stocks trading 2 standard deviations above their 200 day m.a. was over 20%, now at 6%, right near the October lows.
Stocks trading 2 S.D. above their 40 day average peaked near 50%, it is now at less than 3% and below where this rally started.
The MCO had been sowing a divergence for some time, this in my opinion is the best way to use this indicator, it has also crossed significantly below zero. You can really see on this chart where the internal damage to the market was occurring.
Finally the Advance/Decline line for the NASDAQ Composite has failed miserably since the start of February.
There's no arguing with these charts, it's amazing to me the market is still where it is. DON'T FORGET ABOUT THE PRINCIPLE OF REVERSION TO THE MEAN.
We have a market that is 25% off its October lows with internals that are below the October lows, this is indeed a very dangerous market to be long.
ES opened a bit lower, but has stabilized, we have a long night still so I won't read to much in to that. We'll take what the market gives, but I smell some very ripe opportunity.
