{"id":53986,"date":"2020-08-08T15:51:41","date_gmt":"2020-08-08T22:51:41","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=53986"},"modified":"2020-08-09T09:48:29","modified_gmt":"2020-08-09T16:48:29","slug":"t2108-update-stock-market-overbought-bullish-divergence","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2020\/08\/08\/t2108-update-stock-market-overbought-bullish-divergence\/","title":{"rendered":"Stock Market Hits Overbought with A Bullish Divergence – Above the 40 (August 7, 2020)"},"content":{"rendered":"\n

Stock Market Statistics<\/strong><\/h2>\n\n\n\n

AT40<\/strong> = 72.2% of stocks are trading above their respective 40-day moving averages (DMAs) (1st day overbought)
AT200<\/strong> = 42.3% of stocks are trading above their respective 200DMAs
VIX<\/strong> = 22.2
Short-term Trading Call<\/strong>: cautiously bullish<\/p>\n\n\n\n

Stock Market Commentary<\/strong><\/h2>\n\n\n\n

The last overbought period ended in June<\/a>. The volatility index (VIX) did not drop much as is typical for such a bullish extreme. I examined the historical data<\/a> and concluded this overbought period was still a bullish event. I focused on the next buying opportunity to come with a push “close enough” to oversold conditions. <\/p>\n\n\n\n

The “close enough” moment for AT40 (T2108)<\/a>, the percentage of stocks trading above their respective 40-day moving averages (DMAs), was 34.9% on July 9th. As luck would have it, the stock market dropped into a bearish divergence<\/em><\/a> that distracted me from the larger context of my historical analysis. Perhaps predictably, the bearish divergence was short-lived. The S&P 500 (SPY) drifted higher from there, yet I left my short-term trading call at neutral. Along the way nagging bearish signals prevented me from flipping back to bullish even as I focused on 200DMA breakout trades and avoided almost all shorting opportunities.<\/p>\n\n\n\n

On Friday, AT40 closed above 70% and flipped back to overbought trading conditions. A bullish<\/em> divergence accompanied this milestone. While the S&P 500 (SPY) struggled to close flat on the day, and the NASDAQ pulled back from an all-time high, the rally in the stock market broadened elsewhere.<\/p>\n\n\n\n

The Stock Market Indices<\/strong><\/h3>\n\n\n\n

The S&P 500 (SPY) is in a slow motion rally. The index is toying with its all-time high after confirming a fresh breakout above the 2019 close. <\/p>\n\n\n\n

\"The<\/a>
The S&P 500 (SPY) closed flat after a slow comeback from a small gap down.<\/figcaption><\/figure><\/div>\n\n\n\n