November 28, 2008 Stock Market Recap

The market has had a very big run over the last 5 sessions — the S&P 500 is up 19% from the November closing low. Unfortunately the rally has put the indices in short-term overbought conditions and near their longer-term downtrends. Add in the declining volume on the rally and you have a pretty good case for the market to roll over. The Guppy Multiple Moving Averages (below) show the situation well on the S&P 500. It shows a strong long term group of MAs ready to repel the approaching shorter term group:

The following chart also shows some resistance lines just overhead.

It’s a similar situation for the Nasdaq:

A couple of people have been asking me about T2108. It, like many other bottom indicators, totally broke down in this market. It got all the way down to 1.2 in October. Last week’s rally brought it back over the 20 level that typically indicated an oversold condition. In a normal market I’d still be inclined to be a bull, in this market… not so much.

I don’t want to place much emphasis on T2108 until I start to see more normal action in the market. The VIX falling out of the stratosphere would be a good start:

Trend Table

No changes

Trend Nasdaq S&P 500 Russell 2000
Long-Term Down Down Down
Intermediate Down Down Down
Short-term Up Up Up

(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend

*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.

Comments

  1. Posted by Malcolm on December 1, 2008 at 10:35 am

    If you put the GMMA chart up on the 60 day and then expand it to the 1st week of October UWM looks to be just bouncing off the lower band. The other indexes have penetrated and are concerning. From a volume standpoint on the SPY we got into the lower bar of 11/7 week with slightly higher volume. That’s a bid deal for me. So I do not think volume is so terrible. I think we are setting up for the next let up.

    The yen was down last night and that is what is controling everyting. We need a strong yen.