Friday, December 11, 2009

Today's (Yesterdays) Markets

The IWCs - the Russell Micro Cap index -- is also having problems advancing. Notice that prices have essentially stalled in their advance. Also notice the EMA picture -- they are bunched together indicating and overall lack of direction.

I'm a big fan of Dow Theory, which essentially states that averages have advance together. That is, if the SPYs are advancing, then other averages have to advance as well. This would indicates that traders are moving into all areas of the market as opposed to a specific security or average.

The above chart of the transportation average indicates we are not seeing confirming price action. Once prices hit the price level of the first price peak, they stalled. Also notice the types of candles we are seeing at this point -- small an narrow. These are not the types of candles you want to see if you want the market to move higher. In addition, the overall technicals are bullish -- the MACD is rising and the EMAs are in a bullish configuration. But prices have not confirmed this move.

These two charts indicate we are not seeing a broad based advance -- in fact, we are seeing fewer and fewer stocks advance. Some of this is probably due to the end of the year -- we've seen a strong advance and traders are taking profits off the table. This may only be temporary. That is, when the new year starts and everyone has a clean plate we could see additional money committed to the market. However, the current technical position is a bit dicey.