Bourse Review

ASX 

The relative strength of the XSO has proven itself with an upmove in the XJO presumably underway.

Breadth indicators for the ASX are still negative but did reach oversold levels so they're not carrying any particularly strong message.

NYSE

The Russell 2000 is slightly bearish but has been trading pretty much in lock step with the SP 500.

The Nasdaq on the other hand continues to show obvious relative strength.

The McClellan Oscillator and Summation Index are both negative but their time for providing a leading indication has possibly been done for the time being.

One thing that is notable is the NYMOs extended period below zero, shown below with similar occurrences.

The cumulative NYAD does not have anything new to say so it is still bullish however the ema20 is now printing levels that are below zero so breadth has moved into negative territory on a net basis. 

On the bullish or neutral side it needs to be noted that the ema20 is at a level that has marked previous lows and that the market has been basically flat for two months so negative prints should be expected.

NYSE New highs have come back to a level that previously marked lows and New Lows have barely budged in the past couple of weeks...

When viewed together it does tend to look bullish!

On the chart below:

• Blue annotations are bullish;
• Red is bearish; and
• Purple means take note of the relative levels and the outcomes.

Given the above the current setup has both bullish and bearish indications and is perhaps a setup for a spike higher and collapse (but I've been wrong with that sort of speculation enough times before!).

Nasdaq new highs and lows are similar but without the recent negative divergence.

For the NYSE the Bullish Percent Index is peeling off and failing to recover when the market posts an up day. For the Nasdaq it is still looking ok though.

So the upshot of the above is...

There are leading indications for both bullish and bearish outcomes from the current point. 

The Nasdaq, which leads, is looking particularly strong and the faster oscillators have moved down to levels that have previously marked bottoms. 

There are some longer term and short term divergences in play however the recent drops have hardly dented the New Low readings so there isn't much of a case for breadth being hollowed out.

As always it might go up and it might go down but at the moment it is looking to me like a short term low is in place. 

Sentiment

• The CNN and NAAIM sentiment indicators have dropped markedly.
• The AAII sentiment survey has a higher bearish print but is still neutral.
• The Equity Put/Call ratio could go either way so a top may be in, or not.
• Rydex asset ratios are overall bearish and turning, so again a top may be in, or not.
• The VIX is mid-range.
• Fagix:Vustx has made a particularly bullish move!

Given the above my comments from a week or so ago still stand... The overall message from sentiment is that the market has been excessively bullish and that a substantial pullback is warranted, either with or without a spike higher. The pullback in the NAAIM and CNN however is making the current setup a bit indeterminate.

In the meantime I'm inclined to defer to the breadth indications and assume that the markets are more likely to move up than down. This is counter to the broader sentiment though so it's not particularly convincing.