Saturday, July 25, 2009

Weekly Stock Market Commentary: Another week of gains

For the first time since October 2007 markets, like the Nasdaq, have started to reach overbought long term momentum levels (stochastics 39,1). No immediate indication that a reversal is at hand although there are negative divergences at play in the MACD


The S&P has broken from what looks to be an upward neckline head-and-shoulder pattern. The backtest, when it comes, will be important.


However, the chief area of concern remains the breadth indicators. The Nasdaq Bullish Percents triggered a MACD 'sell'


Even the sharp recovery in the Percentage of Nasdaq stocks above the 50-day MA was not enough to reverse its confirmed 'sell'


with the same story for the Summation Index


The concern at this stage is for a repeat of the 2007 meltdown which was founded on negative breadth divergence; the longer this scenario holds - the greater the resulting fall may be. The bad news is that the rally may not yet be over which is only going to trap more bulls.

Buyer beware...

Dr. Declan Fallon, Senior Market Technician, Zignals.com the free stock alerts, stock charts, watchlist, multi-currency portfolio manager and strategy builder website. Forex data available too.

 
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