What is the Internal Nature of the Stock Market Telling Us?

This morning let's look at the internal nature of the market to determine the most probable course for the days ahead.  First, take a look at the chart below of the NASDAQ's oscillators.

Click on the image above to view a larger chart.

You can see above, that often when the 21-Day Oscillator (dark orange line) moves up into that rarified stage, the market is ready for a little breather.  It has already started in some ways, and by looking at the different sectors, you can see where this breather is coming from.

Click on the image above to view a larger chart.

The percentage of stocks trading above their 50-day moving average was around 87% a few days ago, but as of Friday's close, the measure has fallen to 81%.  That is only a small ripple, but you can see in the charts below where that drop is more prevalent.

Click on the images above to view a larger chart.

All sectors are showing slight deterioration, but in the charts above, you can see the more obvious examples.

As we've been saying for the last two weeks, we don't feel pressured to chase new stocks right now.  No, we certainly don't want to get too far out on the "too much cash" side either, but this is the type of environment that we can do a "little" pruning of dead wood and make room in the days ahead (at more opportune short-term conditions) to replant the seeds.

Don Hays

If you are a subscriber to HaysAdvisory.com, click here to read today's [type report name here].  If you would like to learn more about the research and commentary offered by Hays Advisory, click here.

Please see important disclosures at the bottom of this page.