Not Out of the Woods

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Stocks delivered a solid recovery today regaining both the 50 day MA and the 10 day MA. But the Selling on Strength numbers suggest that we are not out of the woods.

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The daily cycle peaked on day 8 and then proceeded to sell off. Stocks lost the 10 day MA last Thursday, the 50 day MA on Monday and delivered more bearish follow through on Tuesday — potentially printing an early half cycle low. Stocks recovered on both Wednesday and Thursday but printed large SOS numbers.

The large SOS numbers printed Wednesday and Thursday continues a trend that I have noticed since this intermediate cycle began in October. We may still break to new highs during this daily cycle, but I think that the SOS numbers will continue to add up. So far this intermediate cycle has totaled a mind boggling 10.04 Billion SOS.

To put this in perspective let’s look at the SOS numbers prior to the March 2009 Financial Crisis low.

sos 3 09

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The SOS numbers leading into the 2009 Financial Crisis low were more than double the typical SOS numbers that we witness during an intermediate cycle. So far this intermediate cycle is almost double the largest SOS number printed prior to the 3/2009 low.

The accumulated SOS for this intermediate cycle is unprecedented and I feel that it is foreshadowing a big correction.

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2 thoughts on “Not Out of the Woods

  1. “ML”…. From Main Line Investor’s site:
    Tuesday’s decline generated an official confirmed Hindenburg Omen, giving the second observation in two days. This means a crash can happen sometime over the next four months as every crash (decline of 15 percent or more) but one over the past 28 years has had an H.O. on the clock. A necessary precondition for a crash is now in place as of Tuesday, January 6th. This tells us the stock market is back in an unhealthy condition.

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