Financials, led by Wells Fargo, and a continuation of the oil bubble deflating a bit, helped push the stock index higher, finally. Volume dropped off a bit from the very high volume day on Tuesday, but was still relatively high. The Nasdaq showed some signs of a rally potential with the price rejection of the lows and higher close than open on the price bar on Tuesday. The S&P didn’t like quite so promising. You can see on the chart above there was some price rejection at the lows with the small buying tail at the lows of the candle. The lower close relative to the open still indicated bears in control. The advance/decline ratio continued to deteriorate, and only upticked slightly today, and still in a very steep downtrend with definite lower lows and lower highs. There was a divergence in the short-term momentum indicator in the lower sub-graph. These divergences can be quite deceptive, although they look good in hindsight on the trades that work out. The down-trend is very steep, and price hasn’t even put in enough of a rally yet to create a swing point as an objective or measure for a change in trend. Even the downtrend line (upper green line) hasn’t been broken on the upside. The S&P should have a lot more work to do before any meaningful rally should occur. The Nasdaq still looks like a better bet on any upside bounce. The price structure is still negative, but there was a better buying tail and a clear swing point just overhead. I still don’t trust trading counter-trend moves, as the path of least resistance is usually to fail with the primary trend resuming, but the market sentiment is so negative that a bounce seems to be just the think to confuse the most traders. I replaced the normal trend moving averages with the standard error bands, which I haven’t shown for a while. I monitor both on my charts, but it is difficult to show everything on the small blog charts. The error bands show the trend direction well and offer excellent support and resistance areas.
Oil finally dropped below the still uptrending moving averages for the first time since February. If the moving averages change direction then I would expect rallies to find resistance at these averages, thus a mirror image of the uptrend. I’ll post chart of crude later in week.