What Message is the Internal Stock Market Giving Us?

Many of our overbought indicators are saying that we need to let the recent rally digest some of its enthusiasm again.  Our sector studies' tendency to show an advancing market's upward momentum any time the percentage of stocks trading above their 50-day moving avaerage rises to 90% is giving that same advice.  You can see below that as of yesterday's market close, we now have 86% meeting that criteria at this time.

Click on the image above to view a larger chart.

One sector, Industrials, has enjoyed the best rebound from the correction of 2011, which you can see in the charts below.  The deterioration from that peak momentum in late 2010 reached the extreme weakness in last year's concern, but that disturbing pattern has now been broken. 

Click on the image above to view a larger chart.

This action in the Industrials sector is a very promising indication for the look ahead.

Don Hays

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