Next-Up … A Melt-Up Higher???

I keep a close eye on the market internals because that is really the fuel that allows the market to make larger moves …

McClellan Summation Index – Daily Chart

Today saw the first positive market breadth signal since October 11th … that is over a month and all that has happened with the SPY is a slow grind higher in price while the trend strength histogram pulled back into the Chop Zone.  That pullback means that the SPY is now ready for its next expansion phase …

An expansion phase coming out of this holiday trading week makes perfect sense as we head into month-end next Thursday, and then get ready for the Santa rally that everyone is counting on.

Cheers … Leaf_West

 

Market Internals – October 27, 2017 …

The market is breaking higher and TSLA is continuing lower … my world is perfect!!  The one fly in the ointment, however, is the poor showing in market internals today.

Market Internals

You can see that the McClellan Summation Index is falling today despite the bullish action in the large cap market darlings.

McClellan Summation Index – Daily Chart

I don’t really care when the market makes a breakout move above a prior all-time high when the McClellan Oscillator is actually declining.  I am watching the internals in the hope of support being found here soon and then a bigger wider, more broad market push higher is launched.  That could lead to a real melt up into year-end.

Cheers … Leaf_West

 

Market Internals – October 24, 2017 …

The market internals are weaker again today, even though the indexes continue to push higher.

McClellan Summation Index – Daily Chart

I think there are better times to begin long swing trades than currently exist here with the overall market near what looks like the end to the recent push higher.  Remember, the market direction and magnitude of its moves make a big difference in the moves made by almost all stocks in those indexes.

Cheers … Leaf_West

Market Internals – October 16, 2017 …

The market has run higher into the meat of the Q3 earnings reporting season … here is a look at the market internals.

McClellan Summation Index – Daily

I like when the odds are in your favor … I commented in late August, that the internals were setting up for a rally in the market.  To me, it appears like the market internals are suggesting at best a period of consolidation or at worst an interim pivot high leading to some sort of a pullback.

If we are going to start chopping, I plan on reducing the time frame of the trades I put on.

Cheers … Leaf_West

Market Internals – October 10, 2017 …

Back on August 27th, I posted my thoughts that the market internals were likely making a bottom and that traders therefore should be looking to take advantage of the upcoming bounce in the market.  As has been the case of the market the past several years, the bounce has lasted longer and gone further than I would have thought.  I was looking at it ending around the September monthly OpEx date.

Well, the measure of market internals that I rely on is the McClellan Summation Index …

McClellan Summation Index – Daily Chart

As you can see on the above chart, the Summation Index painted its first red candle since this rally started.  That is not to say that we are starting to begin a new trend lower here on the S&P 500 Index, but it does suggest that the push higher has begun to weaken.  Look at that move …. this market is amazing.

Cheers … Leaf_West

Getting Near the End of this Bounce?? ….

Back on August 27th, I wrote a blog post about how the market internals that I track (i.e., the McClellan Summation Index), was pointing to a near-term beginning of a bounce in the overall market (click here for that blog post).  While I thought we were about to bounce in the market, I also thought that the bounce was going to find resistance at some point after a handful of days. Continue reading

Market Internals – August 30, 2017

The oversold bounce that I wrote about this past Sunday (click here) seems to be working so far … when I look at the McClellan Summation Index, however, I’m not sure if the bounce will have staying power for the next several days as I originally thought.

McClellan Summation Index – Daily Chart

The last time we were at such an extreme/extended downtrend in the Index, we saw much more conviction in the short-squeeze higher.  Month-end typically sees some sort of a markup in stock prices, so I remain unconvinced if we are going to see a 1-2 week bump/grind higher like I was originally hoping for.

McClellan Summation Index – 195 Minute Chart

The Summation Index should push higher and take out the 195-minute ATR level before the end of the week if this bounce has any real staying power.

Cheers … Leaf_West

Looking for a Bounce …

One of my favorite barometers for how the market is doing from an internal strength point of view is the McClellan Summation Index.  I tweeted out earlier this month (August 8th) when that Summation Index broke down out of its upward broadening pattern …

One of the things traders learn over time is that trades generally work out much better when the trades are taken in the same trend as the overall market.  They also learn that the overall market will move much further and that move will have more strength if the breadth of the overall market is also expanding/trending in the direction of your trade.

The McClellan Summation Index is a cumulative measurement of the advancers versus the decliners so it can help traders keep an eye on the strength/direction of the market.  Here is an update of the index as of the close on Friday …

While I think the index is setting up to show a burst of strength in the market sometime next week, I am cautious of how high the market will move on the next bounce higher.  Here is a snapshot of the McClellan Summation Index from back in late 2015 as we headed into the vicious down market of January 2016.

You can see that back in late-2015, the McClellan Summation Index was starting to look like it was trending lower.  Nothing heads in a straight line forever and the bounce in the Summation Index lasted about 6 green candles (Dec 22nd – Dec 30th) before it began rolling lower.

I’m not saying the market is about to give us a similar push lower like it did in early 2016, but the bounce coming this week should be viewed with caution until it can show us that it is not about to fail after about five or six-days of bouncing.

Cheers … Leaf_West