S&P 500 Trend, Breadth & Volatility ($ES_F $SPY $SPX)

• Charles Amadeus
• August 12th, 2009

The S&P 500 Bullidex fell 4.09% to close at 307 as volatility rose relative to the percentage of rising stocks. A dropping Bullidex suggests a weakening market as the probability of buying and holding a rising stock decreases. Nevertheless, the uptrend in the Bullidex (indicated by the last column of X’s) implies broad market health, but a short term pullback is underway as the evidenced by the NYSE McClellan Oscillator.

No use adding more long positions until the $NYMO reverses, and if it continues to fall I will reduce risk by selling the weakest performers first. There is no telling when the market’s direction will change, but aligning my interests with its present course fosters a calm and rational decision making process. The idea is to avoid getting shaken out on the dips as the S&P 500 continues to climb a wall of worry.

After breaking out on July 16th, the $SPX remains in an uptrend trading above a rising upper Bollinger. A break below 958 would confirm a secondary downtrend, but I’ll be looking to buy the dip so long as the bid remains above 859. Though there are a few reasons to be nervous, most of my charts show high volume accumulation and low volume distribution. Nobody is rushing to get out, and once minor profit taking is done, expect money to come back into the market.