Although the market is running flat here and the VWAP is slightly negatively sloped, the Cumulative Tick and A-D lines are slowly headed northward. We have two opposing signals, one medium-term long-biased, and one short-term short-biased. I will be writting about these more later today. This has clearly been a very nice move off of the Thursday pullback that looks like it will have legs.
[EDIT: Hilarious, I posted "Big Lots" instead of the S&P500, here it is again. VWAP is now definitively headed north.]
Post Close Update: To follow-up on this post, I mentioned the longer-term "long" signal and the short-term "short"/overbought signal.
First the long signal -- This was based on fifteen industry sectors all closing under their 20-day moving averages last week Wednesday. When this occurs, it indicates capitulation, generating a twenty-day long signal. I have this filtered against a yield curve model looking for a normal curve. These ideas are not mine, you can find them in past issues of TAS - though I don't have the exact reference handy.
Second, the short signal -- Sorry I can't go into the detail of this because of my duty to my fund, but the intuition is that when the market indices are below their 200-day moving averages and a strong rally occurs, it is shortable with good edge. You probably didn't need a model to tell you we were stretched after that nice recent move though.
Hopefully this is enough information to generate an independent research project on your part. Feel free to email me.
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