NYSE Summation Index Starts to Trickle Up Again

After looking at the NYSE summation index today I am starting to wonder how wise it is to start shorting this market next week.  The NYSE summation index is showing the 5 day moving average crossing above the 10 day moving average and we also see the Relative strength index of the summation index crossing through the 50 percentile line which is sometimes associated with more positive movement in stocks.

Of course the summation index can curl over down at any time, but as of today it is trending up again after long sideways action in a number of indices including the DJTA Dow Jones Transportation Average which I wrote about recently.

It will be interesting to see how the market closes on the last trading day of the year tomorrow.  If we close within inches of the yearly high it would seem to suggest a follow through up move next week.  On the other hand, a bout of heavy profit taking tomorrow could set the stage for some more downside follow through next week.

I have a more mixed opinion now about what might happen on the change of year.  If the summation index continues higher we could very well see another upside price breakout in the major indices including the DJTA which has been going sideways for weeks and has moved back to up trendline support.

nysesummation20101230

If one looks at the April 2010 period in the Transports one can see that there was a similar rectangle formation which eventually led to the April 2010 blowoff high and then the big correction.

djta20101230

I don’t know if the Transports are going to do the same as they did in March April 2010, but if they are then there could be a big 3 to 5 day upside blow off move next week.

In support of the potential bearish side the daily MACD is within inches of a bearish crossover.  This could be hinting that the last trading day of the year will be hard down with some downside follow through next week. There is also a bearish divergence between daily MACD and the recent price peaks in the sp500.

I may initiate a BOT short signal tomorrow morning if the environment looks ripe enough for it.  I prefer to wait until Monday or Tuesday of next week, but if the ingredients are there tomorrow then I will go for it.

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9 comments on “NYSE Summation Index Starts to Trickle Up Again
  1. jxxd says:

    a lot of truth in what you’ve spoke about, but take a look at the summation index for the nasdaq the 5 day ma has crossed the 10 day (to the downside) days ago, and is getting worse

  2. ed says:

    The theory behind the Hindenburg Omen uses the traditional summation index, not the ratio adjusted(see Stock charts.com). The main trigger would be if it crossed under 1800. Right now it is at 2619. However if you look at the 50MDA, it looks like it is getting ready to cross down under the 200MDA The other trigger would be for the McClellan Oscillator to go negative.

  3. Austin says:

    Cheers to another successful year!

  4. Tom Tom says:

    Interesting John, indeed. Noted also that the Russell 2000 broke down last day of the year.. so with the theory that tech leads everything else maybe we are close to some type of down turn.

  5. Tom Tom says:

    Thank you. Same to you and all other visitors.. Will be interesting to see how much juice the market has in store for 2011.

  6. JR says:

    As indicated last week, I closed out all my more speculative plays such as ITMN, which if everyone was watching created a very substantial profit for me.
    I may have gone flat a little too soon, since I sold out on Thursday.
    I suppose everyone knows I have been bullish for several weeks, so all my positions were long.
    The only one I kept was GE, very conservative. Monday I added a substantial position in AA.
    If GE breaks 19, I am expecting it to go to 25. With AA, I am looking at 20+.
    This morning I am considering a speculative add, by going long on LVS.
    My friends in China are still very bullish on this stock.
    As you know, I have used LVS as on of my favorite trading vehicles, playing both the long and short side. Right now with a neutral RSI, I will be long.
    Best Trading to all!
    And Happy New Year.
    This should be a fun year with lots of opportunity for all.

  7. Tom Tom says:

    Hey JR congrats on your success.

    Quick question. Were you able to get in ITMN under 12 or did you get it after the gap up?

    If you feel like it, maybe post a comment on a nice setup like that here and I can maybe do a follow post on it if it looks good. Maybe I missed your initial reference to ITMN.

    Thanks. Tom

  8. JR says:

    I have a friend who is into these biotech stocks and was following AFFX and I noticed in August that ITMN had entered a joint venture with Hoffmann-LaRoche Inc. and F. Hoffmann-LaRoche Ltd. (collectively Roche) for a Phase IIb study testing RG7227(Esprinet) in combination with PEGASYS (peginterferon alfa-2a) and COPEGUS (ribavirin), the standard of care (SOC) in hepatitis C virus (HCV).
    Additionally, I had an interested in peginterferon treatment of Hep C, a disease that is fairly little known but is as dangerous as AIDS and more common. Peginterferon has been the treatment of choice but is only 60% effective and wrecks havoc on the patient, they feel like they are going insane, and the treatment lasts over 6 months. I was looking for the next best thing, since I knew this market had a tremendous potential.
    So, I guess my interest in ITMN was one of those synergetic events. Sorry, most of my analysis was fundamental not technical.
    In September I got an advance on it from SmartTrend indicating a significant uptrend in ITMN at around $12.00. And I started to chart it then.
    I usually get up around four am in California and check the European news. I read that ITMN had approval for human use for its Hoffmann-LaRochejoint venture drug Esprinet.
    So, I was already prepared, I jumped on it at the opening at 28.34(execution was slow should have got execution at 28.23, Oh well). I guess it was because my order was for 10K shares. Anyway closed it out like I said last Thursday at 36.70. This was probably early, and will give BOT a heads up when I go long again which will probably be when the RSI shakes off the overbought signal.

  9. Tom Tom says:

    Ok thanks man. I am still always somewhat scared of biotech stocks because they seem so event driven and do huge up and down gaps. I rarely trade them unless there is a very clear risk reward and hate to hold them too long either.

    I suppose one has to follow them very closely and know every minor detail and schedule for the best chance of success with biotechs.

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