The Battle Between Advancing and Declining Stocks Continues
Declining stocks have been winning the Tug-of-War with advancing stocks, as NYAD continues dropping into the red-zone for the past few weeks. Many of the Dow Industrial (DIA) components have been the winners, with AAPL, BA, CAT, CVX, IBM, MMM and XOM helped propel the index to all-time highs. Until this changes, it is hard to tell if we are watching rotation or distribution at all-time highs.
NYSE Advancing vs. Declining Stocks (NYAD)
Breadth continues to deteriorate, as declining stocks push this indicator into the red zone. NYMO NAMO and NYHL are all in agreement. In addition, reference is made to commentary during the LIVESTREAM broadcasts about the NYSE TICK Cumulative readings continuous and persistent fade over the past 26 trading days. This needs to change to stay bullish in the short-term.
Despite declining stocks persistent drag, price remains above the trend line shown in the chart above. A break of that trend would undoubtedly have a short-term reaction, as CNBC would begin their talk non-stop about the end of the world as we know it. Markets in Turmoil would again be their mantra.
Unfortunately, that reaction would cause many contrarian traders to look for areas to get back into the markets. Most likely institutions are already positioning for such a move, which would give them a better entry into the seasonally strongest months of the year.
The problem is, if we don’t break the trend and instead start moving higher, the FOMO crowd would most likely kick in. Fund managers will be looking to outperform the S&P 500 into year-end bonus time. Thus we have a conundrum.
Sidenote: repeating what we’ve discussed LIVE, on the weekend video newsletter and in the trading room, we are reducing position size and the number of open positions into strength and will continue to do so until we see a clear path up or down into the fall. No pun intended. 🙂
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