Tuesday, August 05, 2008

Green Light

For the first time since early June, the market is giving an Intermediate Buy signal.

Not only did the NASDAQ poke above its 50-day EMA on decent volume, three of four timing indicators are flashing Buy signals. The 5-10-20, the TOF Ratio and NASI are all on a Buy (see The dk Report charts). Only the BPI Ratio -- typically a lagging indicator -- isn't a Buy yet. It's been a long time since this diverse set of timing indicators have pointed upwards in coordinated fashion.

Image Hosted by ImageShack.us

The chart below shows the NASDAQ is trying to make the best of a bottom retest. It's too early to predict an outcome, but in the past 16 sessions since the low, the Composite has printed just two distribution days.

Image Hosted by ImageShack.us

Even though stocks are gaining their footing, it's important to realize that the buy signal is still a little hazy. Stocks have endured a serious beating over the past ten months, and the NASDAQ has shed 25%. Viewed from a broader perspective, stocks remain squarely in a bear market. Making matters worse, this bear market is still young. It would be unusual for it to be over so soon.

Image Hosted by ImageShack.us

As the IT buy signal sets up, the chart below shows early areas of strength. Relative to their 50-day EMA's, small caps and tech stocks are off to the strongest start. The notable laggard is the MID. Its heavier weighting in commodity-related stocks now works against it.

Image Hosted by ImageShack.us

Good luck trading, and please continue to check in at The dk Report charts. In lieu of regular posting, this list is kept up-to-date.




muckdog said...

Man, only 10 months of beatings. Seems like a lifetime... Interesting article on average duration of previous bear markets.

dk said...

Good to hear from you, and thanks for the article link. I suspect there'll be more pain ahead at some point, but at least football will offer a welcome distraction...