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Outlook: short-term improving
Short-term: bottoming characteristics are visible
Long-term: Uptrend, but weakening
Previous blog entries, as well as my latest newsletter(s), discuss the Cumulative Tick presentation. Here is our current state:
1) the number of new 52-week highs and new 52-week lows are more/less equal. This is to be expected as we move south, and although Friday was a "strong(er)" day, we are at the bottom of the range so I would expect that these two metrics would be at parity. This indicator needs to improve with the number of 52-week new highs (green) significantly outpacing 52-week new lows (red).
2) The markets started buying right out of the starting blocks on Friday and sustained buying all day. The rate was constant and cumulative. This is a good sign (middle plot)
3) The instantaneous cumulative tick (white) has pulled above all moving averages and is above the slowest one (solid red line). This is significant and the indicator has been tuned over years of use. When we cross the red line from below we have met a significant criteria -- now we need the markets to follow through and maintain the upward trajectory. If we continue to meander horizontally it will not be good for buying stocks; we need continued strength.
I will post a Cumulative Tick update via Investfeed or Twitter if I see something significant. For now, note that we have the short-term makings of a recovery, but of course, your crystal ball is as good as mine. We are very, very early in this, and I expect the short-term recovery will fail again before it advances.
Long-Cash Ratio Table
Long-term readers will take a glance at the table and know we are not in a buying position for Monday, May 23rd.
The Long-Cash Ratio (LCR) is constructed by individually ranking over 3000 stocks in terms of historical outperformance and assigning a "long" or "cash" moniker to each. Take the ratio of the two values (long divided by cash), apply moving averages, and look at the slope of the moving averages and you get a sense of how the table functions. The left/center shows slope; the right/center shows "slope of the slope", or rate of change.
The far right shows a new indicator for publication -- simply a composite to get an idea of price trend, slope trend, and overall table trend.
- The far LEFT shows the raw LCR. It moved up +5% from Thursday's value and is now at 0.629. For every 1000 stocks in the database, only 629 are long. This is a snapshot in time and does not tell us which direction we are going, but it does help us understand where we are.
- The left/middle is the slope area, and it is a sea of red. All the slopes are pointing downward, which is indicative of falling stock prices across the board. I do not advocate buying stocks when I see this type of presentation, except for Leaders.
- The right/middle is the slope-of-the-slope area, and Friday was an up day, relative to Thursday. This is the first step of a bottom being formed, and seeing it across all measured time frames is good. We need more of this in order to turn the LEFT side of the table green.
All this being stated, there are stocks that I am watching for possible continued movement to the upside, independent of the broader market. Remember, leaders LEAD:
I will be going into some depth on what makes a "Leader" and how I select them. You'll probably want to register for the letter -- just sayin'.