May 22 - new strength

After several ignored intermediate term top signals and new all time highs the market looks recharged. The technical picture, given some indicators for the intermediate term, is the same as it would be after an initial thrust at the start of a new bull leg. Divergences in breadth and momentum are all negated. It's time for a pull back but this is a buy.

For breadth, here is a  moving ratio of  cummulative advancing versus declining volume for a 1-2 months period:

I've marked the previous divergence that most of the time ends with a bigger correction, as well as the new thrust higher. I did the same for other two breadth indicators:

> the percent of S&P500 stocks above their respective 50 DMAs

> the 13 day EMA of TRIN

For momentum, I chose the average rate of change over a 1 to 2 month period.

This leads to the conclusion that the market is not ready for a 7-10% correction. I think it corrects for just 3 to 5 % into the 1600 -1620 zone and then resumes the climb. There is not much upside left as the bull leg is already 25% long, but a 30% rise already happened during this bull. This would mean a target around 1750.


Here is a weekly chart.

May 6 - the top is close ... again

This time it should be for real. The market is not too far from strong resistance and it has just rallied above the 1600 level. Given the growing weakness of the rally from November, a correction is looming.

Indeed, divergence of this kind in the 13d ema of TRIN has generally signaled an intermediate term top when the market was at strong resistance.