The market action over the past few weeks with respect to money flows have resulted in some interesting patterns across some of the indices. Unless otherwise noted, all charts are $ weighted Up-Down ($UD) volume McClellan Summation indicators (McSum). The $UD McSums provide some insight into which group of stocks are attracting money and which aren't.
First is the NYSE common stocks $UD McSum. Note the NYA $UD McSum broke below all of the rising bottoms going back to May 2004, before finding its latest bottom a few weeks ago, and has recently made its way above zero. The "bumpy" texture of the NYA $UD McSum illustrates the bulls have not had total control of the ball over the past several weeks, but the indicator is posting higher highs and higher lows.
Next is the NDX $UD McSum. After carving out a nice divergent double bottom, the NDX $UD McSum is showing it means business per the large separation in McSum postings and is now poised for an assault of the zero line. It very encouraging for the bullish case the NDX components are beginning to attract money once again following several months of net out-flows.
The SPX $UD McSum is also on the move now, with widening separations in its adjacent McSum postings following a difficult time finding traction from its low a few weeks ago.
The broader based large cap Russell 1000 (RUI) $UD McSum is also on the move up and nominally broke its zero line Friday. The larger cap indices are certainly beginning to attract positive money flows, at least for now. Please note all of the McSums discussed thus far have broken their respective April 2005 lows.
Narrowing down to the sector level for a moment, is a chart of the semiconductor sector (about 160 stocks) $UD McSum. The former support and resistance trend lines are out of whack in this image, but the semis $UD McSum have broken through their controlling resistance and former support trend lines and are poised to get back in positive territory for the first time in several months. Are the tech stocks finally coming back to life?
The SP 600 small cap index (SML) $UD McSum is still struggling a bit in gaining upside traction and has yet to exhibit the conviction to muster a robust rally... not a good sign for this group of "blue chip" small caps.
Contrast the SML $UD McSum with the broader based RUT small cap index $UD McSum. Surprisingly, the RUT $UD McSum is suggesting the broader based small cap universe is attracting money at a more robust rate than the "bluer" cap small caps as represented by the SML.
Next is the surprise, the Russell MicroCap $UD McSum. Recall all of the $UD McSums discussed thus far violated their April 2005 momentum lows. Amazingly, the smallest of the small caps' $UD McSum has thus far held above its April 2005 McSum low. This $UD McSum has broken out of its double bottom "W" pattern and is now ready to challenge its zero line.
The Russell MicroCap $UD MCO has also been strong, taking out its June 2006 high. Late last week, the MicroCap $UD MCO, like many MCOs, has congested, suggesting a sharp move one way or the other early next week.
Even the Russell MicroCap AD McSum has just broken through its controlling resistance line commencing from its early June fish hook high. Note the MicroCap AD McSum did not violate its April 2005 low either... a sign broad based liquidity may be dipping its toe back into the water?
There has been a good start in generating positive money flows over the past few weeks, now it is up to the bulls to prove they are serious by some follow through action.