More....
There are a few market internal indicators worth noting, in addition to what I previously posted about the volatilities.
Specifically, short-term market internals: the advance/decline issues ratio, the advance/decline volume ratio, the NYSE TICK ($TICK), and the Nasdaq TICK ($TICKQ).
The advance/decline issues and volume ratios for the SPX stand now at 4.30 and 4.36 repectively, which are extremely high readings indicating excessive bullishness on a short-term basis (this says nothing about the long-term trend !!).
There were only a few times in recent months when these ratios were this high. Specifically, December 21, January 14, and the very next trading session, which was January 18.
Analysis of this chart will show what happened subsequently.
139.142.147.218
December 21 is the bullish white candle 2/3 of the way through the month, and the SPX closed at 1205 on that day. After that, the index rose a bit more, reaching a peak (on a closing basis) 4 sessions later on Dec. 28 of 1214, which was 0.7% higher than the close on the 21st. It was all downhill after that.
What about the other two extreme bullish readings? January 14 and January 18 are the twin bullish candles (the 10th and 11th candles in January on the 3-month chart).
139.142.147.218
The index reached a peak at the close on the 18th of 1196 (note this is still below the highs of December). Beginning the very next trading session, the index dropped 2.8% over the next 4 tradings sessions, closing at a low of 1164 on Jan. 24.
How about another short-term market internal---the TICK?
Same story there. The NYSE and Nasdaq TICKs have reached extreme bullish values. The last time these internals were this bullish was December 15:
NYSE $TICK:
stockcharts.com[w,a]dallyyay[db][pb10][vc60]&pref=G
Nasdaq $TICKQ:
stockcharts.com[w,a]dallyyay[db][pc10][vc60]&pref=G
Analysis of the chart (in this case QQQQ) shows that this day was the high of the month, and in fact, the high of the year:
QQQQ daily chart:
139.142.147.218
4-year weekly QQQQ chart:
139.142.147.218
In fact, it was a high that had not been reached since December 2002, and has not been approached or exceeded since.
Once again, just as we saw for the extreme bullish reading in the advance/decline indicators, after that extreme bullish reading in the TICKs, it was all downhill after that.
My conclusion is that based on market internals the index has again reached a bullish extreme and reversal to the downside is imminent. This occurs in the midst of a medium-term correction that began on the first trading day of this year. That means it is unsustainable, and reversal to the downside will occur very shortly.
This is not an absolute interpretation, since market internals must be interpreted within the context of the general market trends. So, the interpretation would be different if this occurred in the context of a strong, heavy volume rally within a medium-term and long-term uptrend. Under those conditions, such extreme bullish readings could be sustainable, and the volatilities could also easily reach considerably lower extremes. Indeed, you can see that the reaction of the index to the extremely bullish advance/decline readings was somewhat different in December than it was in January, and that is because the short-term trend was still up, and the medium-term correction had not yet begun either. But that is not the current situation at all. Now, we are in a long-term uptrend, medium-term downtrend, and short-term uptrend.
This supports my previous reasons for believing that a reversal to the downside is very imminent. This could begin as early as Monday (after the retail buy orders are filled, they've suckered in all the designated bagholders they can, and the professionals have taken their short positions---in fact, this very event may be the catalyst, since taking short positions requires selling). Or, it might begin Tuesday. I can't see the current short-term relief rally lasting any longer than that, particularly given the heavy resistance that lies only about 1% above the closing price for QQQQ of $37.75 on Friday.
So QQQQ has about 1% (more or less) rally left in its sails IMHO, then the slide to test lower support will begin.
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