A Long-term Look at Cumulative Breadth
By
Rennie on Sunday, September 20th, 2009 at 7:38 pm
Institutional participation was light on Friday’s triple witching expiration. TICKscore settled at a neutral +4, Cumulative TICK +47,000. NYSE (consolidated) volume dropped to 6.6 billion.
Since staging an ‘overbought breakout’ last Wednesday, the S&P has held that upper trendline the last couple of days, making it an interesting level to watch as we kick off a new week. This line currently resides right around Friday’s low at SPX 1064.
As noted in Friday’s intraday update, there’s a tendency for a lower close after a rally on triple witching, so it looks like trade could turn choppy heading into the mid-week FOMC announcement. Indeed, seasonal tendencies indicate the next week and a half are likely to see the S&P trade sideways-to-down (see my September 14th column), suggesting moves above last week’s high around 1075 could represent selling opportunities. At the same time, SPX 1040 should represent fairly solid support given the 10+ Oscillator readings recorded this past week, indicating we’ll most likely want to buy moves below 1050.
Pull up this chart of Cumulative Breadth and note that it has exceeded its 2008 highs and is on the verge of challenging its 2007 high. Recall that this chart is created by subtracting daily decliners from advancers, then dividing the result by advancers + decliners. The result is then charted cumulatively. Looking back to 1970, we find only five other occurrences in which the Cumulative Breadth line hit a fresh ten-year high (for the first time in over a year). These occurrences were at the end of ’85, mid ’89, mid ’93, early ’96 and late ’03. In each case the breadth breakout was a long-term bullish indication and led to a higher stock market two years later (see long-term chart). If the recent bullish Oscillator readings are any indication (see this 9/17 column), we could very well see the sixth upside breakout before year-end.
Where is the market likely to encounter resistance? SPX 1150 looks like a good target. That represents the upper end of the long-term trendline channel seen on this logarithmic chart of the S&P stretching back to the 1930′s.
A Long-term Look at Cumulative Breadth
By Rennie on Sunday, September 20th, 2009 at 7:38 pmInstitutional participation was light on Friday’s triple witching expiration. TICKscore settled at a neutral +4, Cumulative TICK +47,000. NYSE (consolidated) volume dropped to 6.6 billion.
Since staging an ‘overbought breakout’ last Wednesday, the S&P has held that upper trendline the last couple of days, making it an interesting level to watch as we kick off a new week. This line currently resides right around Friday’s low at SPX 1064.
As noted in Friday’s intraday update, there’s a tendency for a lower close after a rally on triple witching, so it looks like trade could turn choppy heading into the mid-week FOMC announcement. Indeed, seasonal tendencies indicate the next week and a half are likely to see the S&P trade sideways-to-down (see my September 14th column), suggesting moves above last week’s high around 1075 could represent selling opportunities. At the same time, SPX 1040 should represent fairly solid support given the 10+ Oscillator readings recorded this past week, indicating we’ll most likely want to buy moves below 1050.
Pull up this chart of Cumulative Breadth and note that it has exceeded its 2008 highs and is on the verge of challenging its 2007 high. Recall that this chart is created by subtracting daily decliners from advancers, then dividing the result by advancers + decliners. The result is then charted cumulatively. Looking back to 1970, we find only five other occurrences in which the Cumulative Breadth line hit a fresh ten-year high (for the first time in over a year). These occurrences were at the end of ’85, mid ’89, mid ’93, early ’96 and late ’03. In each case the breadth breakout was a long-term bullish indication and led to a higher stock market two years later (see long-term chart). If the recent bullish Oscillator readings are any indication (see this 9/17 column), we could very well see the sixth upside breakout before year-end.
Where is the market likely to encounter resistance? SPX 1150 looks like a good target. That represents the upper end of the long-term trendline channel seen on this logarithmic chart of the S&P stretching back to the 1930′s.