As August draws to a close, the stock market?based on the Spyder Trust (SPY)?looks ready to record the best August performance since 2000. In 2009 and 2012, the gains in August were followed by an S&P 500 return of 3.68% and 2.43% respectively.
With one day left in August there are signs that the market has lost some short-term upside momentum though no top has been completed yet. The strong reading from the NYSE Advance/Decline Line is a positive for both the intermediate- and long-term trend.
The A/D analysis has kept me on the right side of the market since the spring of 2009 as the sharp drops in 2010, 2011, and 2012 were identified as buying opportunities. The high level of bullish sentiment from the AAII readings of the individual investor does not favor chasing the market at current levels. On the other hand, bearish sentiment from the Wall Street strategists is positive for the long-term.
Of course, the volume analysis also plays an important role and the recent low volume has kept many from participating in the recent move to new all time highs. This has been the case several times during this bull market but in each instance the on-balance volume (OBV) has given positive signals keeping traders on the right side of the market.
Therefore, I think a look at the current monthly OBV analysis will help prepare us as we start a new month of trading.
Source: Markets
