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Buying Climaxes Soar -" Are Stocks Moving from Strong to Weak Hands?

The last time we looked at buying climaxes was on May 28, 3013. At that time there were 864 buying climaxes in one week.

Over the next month the S&P 500 (^GSPC) lost as much as 114 points (6.8%).

Buying climaxes take place when a stock makes a 52-week high, but closes the week with a loss.

According to Investors Intelligence (II), which tracks buying climax data, they are a sign of distribution and indicate that stocks are moving from strong hands to weak ones.

The last two weeks saw back-to-back readings of 386 and 380 buying climaxes, the second highest selling activity in 2013.

The chart below shows the number of buying climaxes with an overlay of the S&P 500 (SPY).

View enlarged Buying climax chart here

The small cap sector (IJR) and interest rate sensitive sectors such as financials (XLF) saw a large concentration of buying climaxes.

A substantial increase in buying climaxes doesn’t always result in falling stock (IWM) prices, but it is an obvious warning.

Buying climaxes aren’t the only red flag. A number of sentiment polls have reached multi-month, multi-year, and record extremes.

Those shouldn’t be ignored, because the S&P 500 and Nasdaq are in a technical ‘make it or break it’ zone.

The following article reveals the more than decade long resistance levels stocks are struggling to surpass.

Nasdaq and S&P 500 Held Back by ‘Magic Resistance’”

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF


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