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Market Update

After 6 weeks of down markets, today, the US indexes bounced back with a broad based rally.  There are a few things we are watching for to see if the market is actually ready to rebound higher.

“The first potential major buy signal could present itself in the form of put-call ratio data. The Total put-call ratio’s 21-day moving average has moved above the 0.90 level. This sets up for a buy signal if the 21-day moving average can close back below 0.90 or form a top that holds for 10-days.

Volatility indices are lower across the board today. Furthermore, the futures term structure is flattening from the bearish downward slope it held. If the term-structure can return to a bullish upward slope for two consecutive closes, that would be a bullish indication for stocks.”

Second, today’s rebound is a move of more than 1% in the SPX. This marks the first day in a count that could lead to a confirmed uptrend according to IBD if after 4 days we get another 1% move. We would take bullish positions based on such a signal.

Third, the percentage of stocks below their 20 day moving average jumped higher from a reading below 20 today. This is usually an area where bottoms are formed.

We have a few signs that a short-term market bottom is in place. We will be watching for further signs of strength, but are fully aware this is the weakest part of the year and all rallies will likely be short-lived.

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