Is Stock Market Readying to Bounce?

A Choppy Bounce in January?

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Today, we will try to assess the stock market's internal health after a month-long correction.

S&P 500 Technical Analysis

  • NYSE Adv/Dec Line was leading SPX correction in December. 

  • NYSE Adv/Dec Line is now stabilizing vs SPX. 

  • Time for a bounce in the stock market soon?

US Stock Market Internal Health

  • New Highs minus New Lows (upper figure) is still rapidly declining, which is creating some fear in the stock market.

  • New Highs minus New Lows have been declining since October, but a few large-cap stocks held the market until early December.

  • But the volume in raising stocks started to exceed the volume in declining stocks, as depicted by the McClellan Volume Summation Index. Green shoots?

  • Notice that McClellan Volume Summation Index leads New Highs minus New Lows.

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Fear & Greed Index

  • CNN Fear & Greed Index has been hovering above extreme fear for a few days.

  • I would prefer it to dip into the extreme territory, and one more down day may do it. But it is not required – There is enough pessimism for at least a short-term bounce.

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