NYMO Weekly Issues Buy Signal

Market internals have recently been showing signs of bottoming which would of course imply a bounce of some sort. However, until the improvement in those market internals showed a bit more 'conviction', their signal had not been convincing enough for my liking.  Nonetheless, once they became more developed it became apparent that it's entirely possible, considering that they're emerging from levels where bottoms often occur, that they are signaling more than just a small bounce.  At this early stage the size of the coming move higher is difficult to ascertain but it seems that something significant could be in the works.  From this point forward we'd defer to other methods of measurement to try to get a sense about the power and duration behind this 'bounce'.

But one thing I was waiting for in some of the market internals charts is a positive divergence because until we see one, my own personal conviction in the reliability of the market internals charts was relatively low.  But with the close on Friday we got confirmation of a positive divergence on a weekly chart of the McClellan Oscillator.  This is a very reliable signal and for the first time in quite a while I'm pretty comfortable with long positions initiated earlier in the week, particularly the smaller caps (RUT).  It's still hard to say whether or not it would be wise to start to add to them though, given the schizophrenia that keeps emerging out of Europe.  In any case, here is a weekly chart of NYMO with the NYSE shown in a panel above:

Click here for a full blown version

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