S&P 500 Index (SP500)

[DiscoverGold]

Trading Notes: Monday, January 25th
By Brett Steenbarger, Ph.D.

* January 25, 2016

* Friday saw a continuation of the rebound from momentum lows, with breadth finally touching short-term overbought levels. Over 80% of SPX shares closed above their 3 and 5-day moving averages; that's the first time we've seen that since December 24th. (Data from Index Indicators). The rally took the great majority of stocks off their lows. Across all exchanges, we had 139 monthly highs against 208 lows. Compare that with 44 monthly highs and 3250 lows just two days previous. (Data from Barchart).

* One sign of continued strength on Friday was that significant negative readings in the uptick/downtick measure (NYSE TICK) could not stop us from making higher price lows and higher price highs. I will be watching for that dynamic in early trading today. A drop below the Friday afternoon and overnight lows would likely break that pattern and signal fresh selling interest.

* I will also be watching this week to see if the bearish market themes (weak oil; weak emerging market shares; strong dollar versus EM and commodity currencies) reassert themselves. I'm also watching to see if we can print fresh price highs for this rebound with continued strong breadth.

* A nice view of the market's cyclical behavior is provided by the number of NYSE shares giving buy vs. sell signals for the Parabolic-SAR measure. That cumulative total has tracked market cycles well over the past two years. (Data from Stock Charts). As you can see from the chart below, we've bounced, but are not yet near levels that have corresponded to intermediate-term cycle tops.



http://traderfeed.blogspot.com/2016/01/trading-notes-week-of-january-25-2016.html

• George.

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