Understanding what the stockmarket is doing is an important part of being a successful trader or investor. Over here at Toh CH Capital & Research, we use Fundamental and Technical Analysis in our everyday evaluation of the market.
Technical Analysis “Live on price and die on price”. There is truth to that statement. In our daily analysis of the market, price action is the most important. Take for example the Chart 1 below.
Chart 1 – Market Internals
In Chart 1, the upper chart shows the prices action of the S&P 500. The price chart tells us that the price action is still bullish even though it has pulled back. Below the price chart, the first understudy is the Market Breadth.
In this first understudy, we analyze the $ADD which measures the difference between the number of Advancers versus the Decliners in the NYSE. In Chart 1, it is showing more Decliners compared to Advancers. This is a Bearish signal.
In the second understudy, we analyze the $VOLDC which measures the difference between the accumulation and distribution volume. In Chart 1, it is showing more distribution which is a Bearish signal.
in the 3rd understudy, we analyze the VIX which is supposed to be the Fear index. At 13,70, there is no fear in the market.
The conclusion after analyzing the four charts is that there is no fear in the market and it is still neutral. Market participants are neither bullish nor bearish. Total market volume has dropped.
