September Clues

September is quoted as being the most bearish month but the present setup looks surprisingly bullish.

For the ASX:

The XSO has shown signs of relative strength over the last couple of trading days and is now 12 trading days down from the high so there are some better than usual odds that a low is in place.

The McClellan Oscillator and Summation Index are both negative but perhaps mildly oversold so a rally from here should not come as a shock. Other breadth indicators for the ASX are basically ok given the current state of the price structure.

Many thanks to Rolf for producing his breadth data at  http://www.notesonasx.com/ .


For the NYSE:

The Russell 2000 and COMPQ indices are both quite bullish relative to the SP500, and have been this way for a good while.

The NYMO and NYSI are both relatively unchanged from last week. There is a longer term divergence on the board but with this much time spent going sideways they need a good discount.

The NYMO is on the verge of going positive at the moment so the market may well print the 'option B' spike higher that I referred to last week. If so then this would almost certainly leave a lower high on the Summation Index which is something that has proven very reliable for turns in the last two years of sideways market trading.

The cumulative NYAD is still printing higher highs and therefore supports higher highs.

The ema20 of the NYAD shows the same divergences as the NYMO but with one key difference... The NYMO has been below zero for several weeks due to the fact that is is a comparison between two moving averages and the faster average has obviously been lower than the slower average. The ema20 on the other hand has been consistently printing above zero... Long story short this is not a market with a major slide in breadth going on.

All of the other breadth indicators that I watch for the NYSE are basically ok, as you would expect given the above.

The same indicators for the NASDAQ (which leads) are also ok and if anything are slightly more bullish.

Bulkowski's CPI indicator changed teams last week and is now painted green, again.

Sentiment:

CNN index is little changed from one week ago but there is still no price drop that was suggested by the excessively bullish readings a couple of weeks ago.

NAAIM sentiment dropped a little but is still way high at 88.

AAII sentiment is essentially unchanged, and neutral.

Rydex market allocations are also little changed but again with a significant dearth of bearish investment.

Equity Put/Call ratio says that this is not a low... The high may already be in, or not.

VIX is at the low end of the range... so of course implies 'do not buy here'.


So what does it all mean...

I think that the odds of a decline from this immediate point have dissipated significantly.

A rally from here would print a divergence signal on the Summation Index which to my mind would be a very big deal.

Sentiment also supports a bearish view so I think that a new high on the SPX should be sold, however I would want to see some shorter term indications at that point.

I may yet get to see that counter-intuitive mid September pivot high!