AT40 = 60.3% of stocks are trading above their respective 40-day moving averages (DMAs)
AT200 = 48.7% of stocks are trading above their respective 200DMAs
VIX = 13.4
Short-term Trading Call: neutral
Commentary
The “Apple Temptation” of the stock market seems to be working. For starters, after a 3 week run with a cautiously bearish short-term trading call, I have nudged the needle back to neutral. I perhaps overstayed the welcome a bit after the S&P 500 (SPY) completed several more successful tests of support at its 200-day moving average (DMA). Still, I may prove a bit too early as the S&P 500 (SPY) broke out above its 50DMA for the first time since mid-April, but the index has not yet punched above that mid-April high.
The S&P 500 (SPY) made a bid to earn back its bullish momentum with this 50DMA breakout. The index still needs to make and hold a higher high.
Tech stocks are once again leading the charge. Both the Nasdaq and the PowerShares QQQ ETF (QQQ) are right back in bullish territory with 50DMA breakouts last week and on Wednesday closes above the mid-April high.
The NASDAQ gained 1.0% on its way to confirming last week's 50DMA breakout with a higher high.
The PowerShares QQQ ETF (QQQ) confirmed a 50DMA breakout just like the NASDAQ but trading volume is anemic and falling.
Even if the S&P 500 gives in to the temptation of tech stocks with its own confirmed 50DMA breakout, I will likely keep the short-term trading call at neutral. Not only do I hate churning the trading call, but also I now need to see how my favorite technical indicator behaves near or at the overbought threshold. AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, closed at 60.3%. AT40 could easily test the overbought threshold of 70% by early next week. When AT40 fell away from the overbought threshold in mid-April, my quick reaction enabled me to get (cautiously) bearish in time to make some good trades to the downside. AT40 needs to press through overbought conditions to solidify the case for enough buying power to sustain a bullish trading call.
