Bullish Internal Setup in Equities

Stock market tops usually occur when no one expect them. Investors/traders tend to turn bearish (and bullish) at the wrong times.

Nominal bull markets tend to show signs of age before they peak. Negative divergences of market breadth and tape relative to price and excessive investor optimism are clear signs of aging market rally. These signs of age often precede market peaks by many months.

ADN(E), a measure of market participation, has been leading price to new highs. This positive divergence in the face of ebbing investor confidence reflects what is known as climbing the wall of worry. These positive divergences illustrate vitality rather than a sign of age.

NYSE Composite and Breadth


Headline: Bearish Stock Bets on the Climb

Short selling rose at the New York Stock Exchange and at the Nasdaq Stock Market during the second half of March.

In the exchanges' latest twice-a-month statistics, for the period ended March 31, the number of short-selling positions at the NYSE not yet closed out, known as short interest, increased 0.85%. The positions stood at 12,643,943,208 shares from a revised 12,537,409,289 shares in the period ended March 15.

On Nasdaq, short interest increased 1.60% to 6,668,223,829 shares from 6,563,218,369 shares over the same period.

Source: online.wsj.com