Thursday, July 16, 2009

Evening Summary: Breadth and RSI

More lopsided Breadth...
We ended the day with 9:1 A/D ratio and a whopping 28:1 u/d volume ratio on the NYSE.

This appears to be a slight negative short-term, BUT bullish looking out a 2 to 4 weeks. Only four other times since 1950 have we seen similar readings. While in the short term the market closed lower at some point with in the next three days, in every case the market closed higher 10 days out. Obviously not statistically significant, but given the fact that in every case we were lower within three days and higher by two weeks - it does i think offer a possible trade to consider.

Looking at just occurrences where we have had a 9:1 or greater A/D ratio, we see that again, in the majority of the cases, the market was trading up 2 to 4 weeks later. There were 13 prior instances, and in 11 cases the market was trading higher two weeks later.

RSI(2) again...
Last night an RSI(2) overbought signal was triggered. Obviously, today that signal has been triggered again. Looking back in the past decade for all the times we have had two consecutive RSI(2) sell signals: there were 95 occurrences. In 77 of these cases (or 81%) of the time, the S&P was trading lower 3 days later.


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