Above The 40 – Stock Market Lift-Off

AT40 = 73.8% of stocks are trading above their respective 40-day moving averages (DMAs) – overbought day #7
AT200 = 59.7% of stocks are trading above their respective 200DMAs
VIX = 9.7
Short-term Trading Call: bullish

Commentary
This is what a lift-off for an extended overbought rally looks like.

The S&P 500 (SPY) followed its upper-Bollinger Band (BB) the entire week and gained the first 4 days of the week. The Nasdaq followed its upper-BB but gained EACH day of the week (Friday delivered a very marginal gain). The PowerShares QQQ ETF (QQQ) gained each day of the week on its way to tagging its upper-BB the last 2 days of the week.

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The S&P 500 (SPY) rallied strongly for the week with successive all-time highs.

The S&P 500 (SPY) rallied strongly for the week with successive all-time highs.

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The NASDAQ confirmed 50DMA support with a surge to a succession of new all-time highs.

The Nasdaq confirmed 50DMA support with a surge to a succession of new all-time highs.

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The PowerShares QQQ ETF (QQQ) completed the week with two strong trading days to confirm the on-going extended overbought rally in the market.

The PowerShares QQQ ETF (QQQ) completed the week with two strong trading days to confirm the on-going extended overbought rally in the market.

The Financial Select Sector SPDR ETF (XLF) chimed in with its own stretch for the week to a fresh 10-year high.

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The Financial Select Sector SPDR ETF (XLF) continued its sharp bounce from support.

The Financial Select Sector SPDR ETF (XLF) continued its sharp bounce from support.

AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, took a surprising dip on Friday but remained in overbought territory. AT40 closed the week at 73.8%, dropping from 76.9%. This was AT40’s first decline in two weeks. So while AT40 did not end the week confirming the bullish sentiment, the overall trend is still positive. Granted, with another earnings season coming up, there will be plenty of potential catalysts to boot the stock market out of overbought territory.

Interestingly, the volatility index, the VIX, jumped off its all-time low. Perhaps this was a relief rally off “oversold” conditions. Whatever the driver, the end result was quite familiar. The herd of volatility faders managed to push the VIX off its high of 10.3 all the way back to 9.7. The VIX closed with a 5.0% gain.

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