Dow Industrials Buck the Trend of the Dow Utilities and Transports, But For How Long?
By
Rennie on Wednesday, February 18th, 2009 at 9:37 pm
Interesting to note that the Dow Industrials managed to close higher Wednesday in the face of a 1%+ decline in both the Dow Transports and Dow Utilities. Looking back to 1970, we find only eleven other days in which the Dow managed the same trick, with most cases leading to a flat-to-down market 2-3 trading days later…
Dow Transports & Utilities -1%, Industrials Higher
02/18/09… Dow ???
02/27/08… Dow -3.4% two sessions later
06/05/03… Dow -0.7% two sessions later
05/16/02… Dow -0.6% two sessions later
10/24/01… Dow -0.8% three sessions later
03/13/01… Dow -2.5% two sessions later
06/30/00… Dow +0.3% three sessions later
06/05/00… Dow -0.0% two sessions later
01/25/00… Dow -0.0% two sessions later
03/06/91… Dow -0.6% two sessions later
08/25/81… Dow -1.4% two sessions later
05/25/76… Dow -0.6% two sessions later
The market’s providing little to like from a longer-term perspective. The New High-Low Index is back on the mat with New 52-week Lows surging to nearly 300 on Wednesday vs. 1 New High. New lows also expanded to their highest level of the year on the NASDAQ even as the NDX continues to hold above its January lows. That’s not a positive divergence as it indicates deterioration beneath the surface. Also note that the 20-day moving average of the NASDAQ/NYSE Volume Ratio is on the verge of moving back above the 1.50 level, a bearish sign from a longer-term perspective as it implies relatively heavy speculative participation. That moving average should be headed in the other direction, towards 1.0, as it has at previous major market bottoms.
While speculative activity remains relatively high, institutional investors are busy selling, reflected in another round of very negative NYSE TICK action Wednesday. TICKscore settled at -53, Cumulative TICK -81,000. Breadth settled 2:1 negative, sending the NYSE McClellan Oscillator into technically oversold territory at -220. However, readings below -200 have been unreliable at calling a short-term bottom. The same can be said of other oversold indicators such as the fact that the OEX closed under its lower bollinger band for a second consecutive session Wednesday. Consider that over the last thirty separate instances in which the OEX posted two consecutive closes under its lower bollinger band, the OEX posted a subsequently higher close within the next three days in 24 out of 30 cases, or 80% of the time (this is true for the last thirty -200 McClellan readings as well). That may sound pretty good until you consider that the at-any-time odds of the OEX posting a higher close within the next three sessions is 72%. This tells you that both of these oversold setups are barely better than random, and should not be construed as a reason to turn short-term bullish.
Dow Industrials Buck the Trend of the Dow Utilities and Transports, But For How Long?
By Rennie on Wednesday, February 18th, 2009 at 9:37 pmInteresting to note that the Dow Industrials managed to close higher Wednesday in the face of a 1%+ decline in both the Dow Transports and Dow Utilities. Looking back to 1970, we find only eleven other days in which the Dow managed the same trick, with most cases leading to a flat-to-down market 2-3 trading days later…
Dow Transports & Utilities -1%, Industrials Higher
02/18/09… Dow ???
02/27/08… Dow -3.4% two sessions later
06/05/03… Dow -0.7% two sessions later
05/16/02… Dow -0.6% two sessions later
10/24/01… Dow -0.8% three sessions later
03/13/01… Dow -2.5% two sessions later
06/30/00… Dow +0.3% three sessions later
06/05/00… Dow -0.0% two sessions later
01/25/00… Dow -0.0% two sessions later
03/06/91… Dow -0.6% two sessions later
08/25/81… Dow -1.4% two sessions later
05/25/76… Dow -0.6% two sessions later
The market’s providing little to like from a longer-term perspective. The New High-Low Index is back on the mat with New 52-week Lows surging to nearly 300 on Wednesday vs. 1 New High. New lows also expanded to their highest level of the year on the NASDAQ even as the NDX continues to hold above its January lows. That’s not a positive divergence as it indicates deterioration beneath the surface. Also note that the 20-day moving average of the NASDAQ/NYSE Volume Ratio is on the verge of moving back above the 1.50 level, a bearish sign from a longer-term perspective as it implies relatively heavy speculative participation. That moving average should be headed in the other direction, towards 1.0, as it has at previous major market bottoms.
While speculative activity remains relatively high, institutional investors are busy selling, reflected in another round of very negative NYSE TICK action Wednesday. TICKscore settled at -53, Cumulative TICK -81,000. Breadth settled 2:1 negative, sending the NYSE McClellan Oscillator into technically oversold territory at -220. However, readings below -200 have been unreliable at calling a short-term bottom. The same can be said of other oversold indicators such as the fact that the OEX closed under its lower bollinger band for a second consecutive session Wednesday. Consider that over the last thirty separate instances in which the OEX posted two consecutive closes under its lower bollinger band, the OEX posted a subsequently higher close within the next three days in 24 out of 30 cases, or 80% of the time (this is true for the last thirty -200 McClellan readings as well). That may sound pretty good until you consider that the at-any-time odds of the OEX posting a higher close within the next three sessions is 72%. This tells you that both of these oversold setups are barely better than random, and should not be construed as a reason to turn short-term bullish.