We noticed on Thursday evening how poor the internals were for the SPY based on Price Momentum Oscillator (PMO) internals. These internals are the percent of stocks with rising PMOs and the percent of stocks with PMO Crossover BUY Signals. The accompanying short-term Swenlin Trading Oscillators (STOs) and IT Breadth Momentum (ITBM) and IT Volume Momentum (ITVM) are also in decline.
Currently a mere 18% of stocks hold rising momentum. This is not a good foundation for a rally. At the same time I know that things get as bad as they are going to get before they start getting as good as they can get. These are oversold readings that could see an upside reversal. For now they are puny readings. Note also that the STOs turned down in negative territory.
We currently have less than one quarter of stocks with PMO BUY Signals where the PMO is above its signal line. We note that this indicator also saw a top below the signal line which is also quite bearish. Both the ITBM and ITVM continue to decline out of overbought territory. They still have plenty of real estate to fall further.
Conclusion: While the rally on Friday could change the face of some of these indicators, the PMO indicators won’t likely see a significant upside reversal. Even if they do, they are still likely to be reading below our bullish 50% threshold. Considering how close we are to all-time highs, we should have stronger internals. Beware.
Good Luck & Good Trading,
Erin Swenlin
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Price Momentum Oscillator (PMO)