I've been on the road this weekend, bringing my sons to visit their grand-dad and celebrate his 89th birthday. As a result, posting has been slim over the last few days but I wanted to provide these charts for your consideration as an alternative to the pervasive bearishness that has been out there lately
In the chart below we count the number of stocks above various moving averages and count the number of moving average crossovers, as well. We scan roughly 6400 stocks and ETFs each weekend and plot the results against a chart of the SPDR S&P 500 ETF (SPY).
This chart shows that the market took a body blow last week but is still standing. Last week I wrote that the market was surely going to move up based on the pattern emerging on this chart where the yellow line (number of stocks above their 50-DMA) had moved decisively above the magenta line (number of stocks whose 20-DMA is above their 50-DMA). The yellow line has taken a step back but is still well above the magenta line. Furthermore, the magenta line has held in place. This, to me, suggests there is still some underlying strength in this market.
The next chart provides our trending analysis. It looks at the number of stocks in strong up-trends or down-trends based on Aroon analysis.
Last week's action essentially stopped this chart in its tracks. Whereas the previous weeks had seen some very nice improvements in the number of stocks that were showing strong up-trends, this past week showed a slight decline. The good news, however, is that the decline was merely slight despite the fact that stocks had a pretty rough week with most averages falling more than 3%.
This coming week, stocks will be hostage to employment reports. Wednesday comes the ADP employment report, Thursday is initial claims and Friday the big Nonfarm Payrolls report. Expectations are low for all of these reports so any glimmer of hope related to jobs could serve to further strengthen support for stocks.
Technically speaking, stocks stubbornly keep from establishing new lows while cycling above and below the 200-day moving averages. It makes this market a nail-biter. Nevertheless, I can't quite embrace the bear case. I would not be surprised by a move to the upside.