Monday, February 10 Login

The stock market rebound continued last week as the rally was confirmed on January 15th as the Nasdaq 100 A/D line closed back above its 21-day EMA. The Invesco QQQ Trust (QQQ) had tested the monthly S1 at $500.37 two days earlier with a low of $499.70. In just nine days the QQQ was up 6% from the lows closing on January 24th at $529.63.

In my analysis of the stock market I not only review several technical studies that measure not only the price momentum but also the volume as well as the market internals. The cumulative reading of these indicators I use to determine a composite view of the markets or my version of what legendary technical analyst Stan Weinstein called the weight of the evidence.

I also track some fundamental data from a technical perspective as well as assess the stock market sentiment. I look at not only the outlook of the professionals as well as that of individual investors from the weekly surveys from the American Association of Individual Investors (AAII).

This data is something I often discuss on Forbes as in “The Technical Secrets Of Stock Market Sentiment” but sometimes it does not significantly add to the weight of the evidence. The Spyder Trust (SPY) made a new high on Friday, January 24th at $610.78 but then closed lower for the day.

SPY had almost reached the monthly S1 pivot support at $575.65 on Tuesday, January 13th. Two days later the AAII survey revealed that only 25.4% of those surveyed thought stocks would be higher in the next six months. That was quite a drop from 34.7% bullish the prior week.

I had been monitoring the AAII readings after the S&P 500 A/D line and others signaled a correction on December 9th by dropping below their MAs. The bullish % had a December 4th high of 48.3% after a reading of 49.3% on 11/13 and a recent peak of 50.8% on 9/18.

As the SPY declined into January the bullish % had formed a series of lower highs culminating with the 25.4% low on January 15th. That day the S&P 500 A/D line moved back above its WMA as the SPY closed above the January pivot at $591.34. SPY rallied the next week and the bullish % soared 18 points to 43.4% as the declining trend was broken. The latest reading will be available on January 31st.

The jump in the bullish % last week put me on alert as the new high for SPX/SPY (line a) last week was accompanied by a lower high in the S&P 500 A/D line. This bearish divergence will be given more weight should the SPY close sharply lower.

The heavy selling early Monday has pushed the SPY lower by mid-day Wednesday but it is Friday’s close that will be more important. The NYSE Stocks Only and NYSE All A/D line (not shown) have also not made new highs but neither has the NYSE Composite so no divergences have been formed. Should these A/D lines drop below their MAs it will suggest a deeper decline.

The Nasdaq 100 (NDX) and Invesco QQQ Trust (QQQ) have not made new highs with the S&P 500. Both the weekly and daily Nasdaq 100 A/D lines are above their MAs and positive but are also still below the highs made in early December. If there is going to be a further market correction there should be further warnings from the NDX 100 A/D lines.

This article is being released just ahead of the Wednesday, January 29th FOMC announcement on rates with the GDP and PCE inflation reports on Thursday and Friday.

Read the full article here

Share.
Leave A Reply

© 2025 Breaking News Today. All Rights Reserved.