Eliades Stockmarket Cycles update for Wednesday June 14th.
Today's New 10 Trading Index closed at 0.756, still below the .80 required
to trigger a short-term sell signal. There are several important technical
readings shaping up as potential warning signals. One of the indicators
that we comment on from
time to time is in indicator we devised ourselves. It simply keeps track
of how many up days there are within a 54 market day period for any
individual indicator, whether it be the Dow Jones Industrial Average, the
S&P 500, or daily advances vs.
declines, or any other indicator. There is a tendency to swing between
readings of around + 16 on the low side to around + 36 or 37 on the high
side. Readings in between those two extremes can also be important
depending on recent history. For
example, today's advance decline reading was 30. That was the highest
number of up days per 54 days for the daily advance decline line since July
12th, 1999. That date just happened to be three days before an important
top on the advance decline
line . Looking at a chart of the advance decline line shows us that it has
just moved above its exponential 100 day moving average, and it has moved
almost exactly up to its simple 100 day moving average. The recent peaks
on the daily advance
decline occurred on April 3rd, April 7th, April 12th, and May 1st. Today's
close was just below the peaks of April 3rd, 7th, and 12th, and just above
the peak of May 1st. There is potentially strong resistance around this
level or a little higher
and when you couple that with the potential resistance from the 100 day
moving average and the fact that the "days up per 54" indicator is at its
most overbought level since July 1999, the market could be at or very close
to some kind of top.
A colleague of ours, Alan Newman, pointed out yesterday that his 21 day
moving average of the dollar volume of 0EX puts reached its lowest reading
in history. It is similar to a put/call ratio and is a good measure of
market sentiment. It is
currently telling us that investors are as complacent as they have ever
been in relation to the stock market. There is not only a lack of
bearishness, but there are strong indications that investor bullishness is
very close to historic extremes.
The ratio of assets in the bull funds vs. assets in the bear funds at the
Rydex Group of funds has also moved to, or very close to, historic
extremes. The McClellan oscillator closed today at + 91.4 with the
Summation Index at + 1,075.8. The ratio
adjusted Summation Index closed at + 24.1, and that is the first positive
reading on that indicator since July 23rd, 1999. The bottom line is it
appears the market could move slightly higher over the next day or two, but
the technical indicators are
telling us the market could well have grown very vulnerable here. |
