Little has change in the price/volume diffusion index from when I last provided an update. As of the end of trading day Friday, the diffusion index sits at 62.6, better by more than point versus the close of the market in the previous week The following is the chart of the diffusion index, versus the S&P 500, for the last two years.
The trend in the diffusion index is at the very least flat to down over the last few months, depending on your starting comparison points. That said, an index value over 50 continues to indicate a positive forward performance bias (absolute and relative) for the equity markets. Additionally, the raw indicator rolling summation continue to track upwards- shown below. In my mind, this is another positive indicator for future market performance
That said, not everything is coming up roses either. The slope coefficient of the the summation indicator is down from just a few months ago.
In the past, this has served as an early warning, at the very least it indicates that the volume support as equity prices move higher is slowing. This also jives with what I am seeing in the analysis of the swing points the market (as exampled by the S&P 500 Spider, SPY) is currently trading in to. Friday's close brought the SPY above the $150 level., as just 147 million shares exchanged hands. This compares to benchmark points way back in late 2007, where more than 300 million shares changed hands on downdrafts in November and December of that year. This leads me to conclude that the market bias is still up, but traders and investors should be cautious for the risk that sellers come into the market.
The trend in the diffusion index is at the very least flat to down over the last few months, depending on your starting comparison points. That said, an index value over 50 continues to indicate a positive forward performance bias (absolute and relative) for the equity markets. Additionally, the raw indicator rolling summation continue to track upwards- shown below. In my mind, this is another positive indicator for future market performance
That said, not everything is coming up roses either. The slope coefficient of the the summation indicator is down from just a few months ago.
In the past, this has served as an early warning, at the very least it indicates that the volume support as equity prices move higher is slowing. This also jives with what I am seeing in the analysis of the swing points the market (as exampled by the S&P 500 Spider, SPY) is currently trading in to. Friday's close brought the SPY above the $150 level., as just 147 million shares exchanged hands. This compares to benchmark points way back in late 2007, where more than 300 million shares changed hands on downdrafts in November and December of that year. This leads me to conclude that the market bias is still up, but traders and investors should be cautious for the risk that sellers come into the market.
