Since the 06/04 pivot the SP has increased a modest 7% over 7 weeks. Unfortunately this move has been anything but a persistent up trend due to the intraday volatility and whiplash from the sharp pullbacks that have occurred along the way. The appearance of higher lows and lower highs is visually constructive action but the underlying breadth that I follow is indicating some issues.
The first and most critical is the lack of buying pressure, particularly a follow through to what at the time looked like a very bullish kick off on 06/29 when 675 stocks in my universe were up 4% on increasing volume from the previous session. This move was also highlighted by the 2% move with a close near the high as well as kicking off from a pivot low established by the prior pullback. The flaws began to become apparent a few days in when there was no follow through indicating there was not a rush to get into the market and a mere 4 days afterward selling began to outpace buying.
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| 4% Adv/Dec |
In addition the most recent 3% leg up comes on a declining ten day differential of buying to selling. A divergence of an increasing index coupled with decreasing buying should begin begin to set off flags.
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| 10 Day Buying/Selling |
This lack of participation also shows up on the Primary that I follow which will increase sharply when there is strong buying and bidding up of stocks. It started moving from the 06/29 buying day but quickly peaked within 3 days before rolling over, and ever since has been showing lower peaks before quickly turning back down after a string of positive days.
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| Primary |
On the one hand the action on the indexes is positive, however there's also some danger to be thoughtful of because there is still a lot of headline risk to this market along with catalyst risk as earnings are looking less than stellar. Given that this move has come on weak breadth is further reason to tip toe here because for the duration there has been a lacking in buying support, so a sneeze of selling could hit this market hard and be contagious.
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