A Look At Market Structure - March 2, 2012

The 20 DMF and GDX MF were almost unchanged yesterday and both robots are waiting in cash for some large players action. In the meantime, I’ll share my daily algo forum comment with the VIT forum.

For the RT GDX Model, we note that the ATR is now above the triggering level allowing us to enter a RT short signal if the GDX MF crosses below -0.14%. But a RT buy signal would be issued on a crossing above +0.14%. Both buy or sell signals would be protected (stopped) by a reversal beyond the -0.14% or +0.14% porosity level.

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The percent of stocks in daily accumulation and mark-up stages has fallen back to the equilibrium level of 50%. A strong push below 50% could hint at the start of the first meaningful pullback of the year.

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The daily evolution of market structure confirms a loss of momentum for the overall market. A majority of stocks have fallen into early distribution which remains bullish as it only indicates a gentle pause in the longer term uptrend.

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The market is still very far from a declining stage and could grind higher for weeks even with a deteriorating structure. This happened for example at the end of 2010 when IWM kept climbing despite a very similar weakening structure scoring evolution.

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On the IBD Accumulation/Distribution Ratings front, the overall market seems to have reached its cruise control status around 65% that characterized the 2009 QE1 rally. The current drop of average ratings simply hints at more frequent dips and pullbacks from now on.
Billy
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