Stock Market Consolidation – Flag or Fade
We are anticipating a few days of consolidation before heading higher. The reasoning is fairly straightforward. The stock market advance has been steady, with numerous stocks breaking out to new highs, while few have failed.
This activity shows very clearly in a graph of new highs versus new lows. As more stocks advance to new highs, green histogram bars push above the zero line. Applying a moving average gives us a cycle. Comparing this cycle to previous occurrences gives us a crude benchmark or reference.
Additionally, advancing stocks have outnumbered declining stocks on a cumulative basis, as indicated in the lower panel of NYAD. Bollinger bands are opening, while price hugs the upper band, suggesting momentum has not fallen off, despite Monday’s narrow range day.
SPY Shows Consolidation
The S&P500 ETF illustrates similar thoughts.
TICK cumulative suggests institutions are buying. The narrow range suggests we’re taking a break.
I will be late this morning, most likely in by 10:00 AM. My son has a Spring Concert today.