We are updating our look at the S&P 500 via our favorite chart of SPY. We update this chart each week in Superstock Investor. There is some improvement again this week.
Since the close of October 10th, the Weekly Displaced Moving Average (DMA) Channel (Orange Band) has been below or in the DMA Channel which means that the bias had been negative. This week it remains in the channel. The Daily (Yellow Band) is back in the channel as well given the recent stall.
Second, the Erlanger Volume Swing (EVS) is at 5.53 from 13.62. Above 0 is good and below 0 is bad. The current action is showing some signs of getting tired but is still positive.
Third, the Erlanger Crossover Spread (EC) Spread is at 69.56 from 62.19 which is continued improvement.
Last, the Erlanger Trend Direction (ETD) moves to uptrend as it is now green in the upper half.
So what is an investor to do here? We would recommend to stay with strong stocks and begin to nibble on weaker stocks in rally mode on the ETD.
Several indicators remain weak which is why we adjusted how we add to positions in our Morning Matters Portfolio. For now, cash is at 58% from 50% and we are nibbling on new buys.
We recommend that you begin to build a shopping list of new ideas to buy in addition to nibbling on really weak days because the buy the dip crowd is back again.