Shining Apple Like Cramer ~ The Risk Averse Alert

Tuesday, October 28, 2008

Shining Apple Like Cramer

Bottoms up! Oh, I know you're wondering... Is bottom in? Yeah, it's in alright ... in the vicinity. And that's it. If nothing else, today went some way toward furthering the probability the stock market is in the process of bottoming.

First, it is encouraging to see the stock market's large-capitalization indexes relatively outperforming the broader market...


As you can see, the S&P 100 broke out of its declining trend since peaking intra-day on Tuesday, October 14, 2008. Mind you, there is really nothing analytically noteworthy about this. I point it out only to reveal large-cap leadership being demonstrated. You'll see how in just a moment...

You might also note the S&P 100's intra-day low set on Friday, October 10, 2008 was not once exceeded prior to today's turn higher. This is a positive indication some well-capitalized buying interest is willing to snap up the cream of corporate equities. Thus, one might conclude the market's "generals" are leading the larger army out of a ditch. And this is as it should be at this point in the battle. Large-cap leadership offers evidence bottom is in the vicinity.

Still, despite signs of improving circumstances, there's no reason yet to get excited. RSI continues to trend lower and MACD, despite looking to bottom, has yet to decisively turn higher.

Now, lets contrast the situation presented by indexes tracking both major U.S. exchanges...


Beyond yesterday's price-RSI divergence (relative to 10.10.08) I am hard-pressed to find anything constructive to say here. Nevertheless, the RSI divergence itself is positive indication the NYSE Composite's bottoming process is a work-in-progress.

Clearly, though, there's more work needed before bottom finally is in. Curiously enough, no price-MACD divergence registered yesterday. Instead, MACD confirmed the NYSE Composite's new low close. So, evidence here tilts toward maintaining a cautious posture. Once again there's just no compelling reason to get excited about today's surge higher.


Just like the NYSE Composite, the NASDAQ Composite registered a price-RSI divergence yesterday (relative to 10.10.08). There are a couple other positive developments to note here, too...

First, yesterday's NASDAQ close at a new low coincided with a positive MACD divergence. And second, today's surge higher brought the NASDAQ Composite right up to its declining trend line (originating at its 10.14.08 peak), whereas the NYSE Composite fell well-short of its same declining trend line.

You will recall when I wrote, "Another Not-So-Kudlow-esque Chart Fest," my describing how NASDAQ demonstrates leadership in both directions. We're seeing the same thing here as the market forms bottom. So, much as large-cap indexes are revealing the sort of leadership one would expect, NASDAQ too is doing the same.

Tonight, Cramer talked about AAPL in much the same light.

Still, caution here is better advised...

OEX 5-min
NYSE 5-min
NASDAQ 5-min

Is there really any need to micro-analyze the situation 5-minute RSI reveals? The last time this happened was at the open on October 14th. At 9:36 a.m. Mr. Market Twitter said, " Red Alert! 5-min RSI screams 'SELL, SELL, SELL!'"

So, again, the last of selling probably has not been seen ... and odds Maria will soon moan in utter frustration still remain elevated...

Fast Money
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