Thursday, July 19, 2012

Some Technical Thoughts on the Market ...

Just thought we should provide an update on technical analysis of the equity market.  Of course, the market has moved up very nicely the last couple of weeks.  The 10-day EMA did not dip below the 50-day.  In addition, S&P 500 remains slightly below the Bollinger Band's upped band which is around 1380.  The MACD also has moved a bit away from what we thought would be short term bearish levels.  With all of that said, what stands out is the advance-decline numbers.  We looked at the McClellan Oscillator which basically analyzes the difference between advances and declines in exponential moving average terms.  We saw that it is within a range which can be considered as overbought.  Today, it has moved up to 112, within the overbought range of 100 - 125. We note that this doesn't necessarily indicate an upcoming pullback as this index went all the way up to 285+ and 300+ in Oct '11 and first week of July this year.  However, this combined with the S&P 500 nearing the upper band of the Bollinger indicator, could initiate some profit taking which would move the market lower, assuming no additional 'magic words' will be heard from worldwide central banks.  

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