Market Builds the Wall of Worry

The Dynamic Trading System generated a buy signal on the S&P 500 at the close of trading Monday. The system holds no positions in Nasdaq 100 instruments at the moment.

The SPX bounced -- though unimpressively -- off the demand line (the line of rising lows) that defines the October-January trend zone. The roughly three-week journey from the supply line down to the demand line has been a lazy, meandering affair.

There's been very little pop in the market, with 20-day volatility shrinking down to about 6%, near cyclical lows. The SPX is also testing horizontal support (black horizontal line in the price pane) at about 1408.

Absent some exogenous data that throw the market into a tizzy, I expect some further upside in the near term, though a new high on the SPX looks doubtful on this current signal.

The NYSE DTS Oscillator, which measures short-term internal buy/sell pressure on the NYSE, generated a buy signal by turning higher from an oversold condition Monday. The indicator is likely to work its way higher over the next few days.

The NYSE DTS Midterm Oscillator, which measures midterm buy/sell pressure, is likely to remain choppy, near the zero line during the coming week.

The New High Percent Line is the five-day moving average of new highs divided by the sum of new highs plus new lows, which I interpret to represent the strength of leadership. And it's now deteriorating, though I don't see this indicator falling below the key 80% level, so at this point, we don't have a clear signal that the trend is deteriorating internally.

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Adam Oliensis is president of Dog Dreams Unlimited, a guaranteed introducing futures brokerage, and editor of the trading service The Agile Trader. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Oliensis appreciates your feedback; click here to send him an email.