Buying Interest Has Withered

On Thursday, the S&P regained most of Wednesday’s losses with a rally of 1.2%. Advancing issues outpaced decliners by a 10:3 ratio, and momentum still has a bullish bias for a majority of the 27 S&P industry groups on both a near and medium term basis.

All seems well, correct? Unfortunately, volume is a growing concern. Total volume was essentially unchanged on Thursday, compared to Wednesday’s level, and was below its 21-dma for the 10th consecutive day. Moreover, our measure of buying interest has withered recently, while sellera have remained constant. This relative deterioration is taking place in an environment where (as mentioned in the recent monthly Insights), the cycle background will soon turn negative.

All that said, the rally still deserves the benefit of the doubt. We are concerned about its increased maturity, but the recent move through 944 did open the door for a possible challenge of 982.

In terms of support, we have used the 880 area as a support/stop area in recent weeks. It is likely that we’ll raise that level fairly sharply in our weekend update.

Editor’s note: given the very recent release of the monthly Insights, there will be no Short Term Review this weekend. We will, however, publish a comment on this blog.