Weekly Update: Dec 17 2015 Market Remains in the Doldrums

Even though the market reacted positively to this week's Fed announcement to raise rates, it quickly reversed back into negative trend territory. 

If we look at my chart plotting the weekly indicator it's easier to see the overall trend. We've only had two weeks above the 50% line.  The next two weeks are holiday weeks and some of the market activity will be mutual fund 'window dressing', so we will wait through December to see what January brings.

Broad Market Indicator #6: NYSE 52 Week Highs and Lows

The NYSE 52 week new highs vs. new lows data is helpful is seeing how stocks are measuring up on a weekly basis. This indicator should not be used by itself, but it is a helpful tool to see if there is a trend. Weeks of above or below zero (0) indicate a shift.  On this chart, you can see if began to break down in June and just recently peaked up over the line for the first time in 15 weeks.

Barron’s has great source data if you want to chart it yourself.

Broad Market Indicator #5: NYSE A-D 200 Day Moving Average

For this indicator, we look to see if the NYSE Advance-Decline (A-D) is above or below its 200 day moving average. The divergence between the advances and declines is plotted on a chart, and the 200 day moving average is also plotted. Here is what we are looking for:

• Crossing the 200 MA line (above or below) is the most important signal
• The longer the period before the 200 MA line is crossed, the more meaningful the move.
• Most significant moves are made when there is a change in direction from a long-term pattern. Hovering around zero (0) is not significant.
• Bearish signal: A switch from a long-term positive (above the 200 MA) to below the line
• In a Bull Market, the gauge will reach its peak before the Dow (DJIA) reaches its peak.

Let’s take a look at the indicator. If you look at the chart below from Stockcharts.com, the peak for the NYSE A-D was in April. The Dow peaked a month later in May. The interesting thing to note now is that the A-D line has just touched its 200 day ma line. Let’s see if it can break through.

Data Sources:

• Stockcharts using their $NYAD symbol. Look the chart above for the settings I used.
• McClellon Oscillator Site
• New York Stock Exchange NYSE data

Broad Market Indicator #4: NYSE Advance Decline (A-D) Line

The 4th Indicator is a comparison of the movement of the DOW (DJIA) to the Advance-Decline line of the NYSE. The NYSE A-D line measures the number of stocks advancing versus declining on a weekly basis. We are looking to see if the Dow and the NYSE A-D are moving in convergence or divergence. When the DOW goes up but the NYSE A-D line goes down, it is an indication that investors are moving into safer stocks (DOW) as the DOW tends to have blue-chip companies. 

Here is Barron's chart plotting the NYSE against the DOW. I added the red boxes to show where the DOW moved up while the NYSE AD moved down, ominous signs!

You can follow Barron's chart at this link.

You can see the breakdown signal that occurred in August prior to the latest market correction. We will need to wait and see if we are about to go back down again for a period of time.

Broad Market Update: Stormy Weather

This week any positive signals in the market went south.  All of the 9 indicators are now negative. This week saw the S&P, Dow and Nasdaq break their 30 week moving averages. Not a good signal. 

Averages move south

I am out on the sidelines for now.

Broad Market Indicators #1 - #3: 30 Week Moving Average on the Major Indices

What are the broad market indicators? Indicator #1 – #3 looks at the major indexes on a weekly basis to see if the price is above or below the 30 week moving average. The key here is weekly, not daily basis, as this view allows us to see things on a broader macro level.

The Indexes vs. the 30 Week MA indicator started to flash warning signs in July and then broke the 30 week moving average in August. They recovered in the beginning of October but are now hovering just above, with the exception of the Global Dow which is well underneath the moving average.

Weekly Update: Markets signal downtrend

Three of the nine indicators are in the red this week signaling weakness in the recent market improvements.

Bull Indicators: S&P, NasDaq and Dow are all above their 30 week moving averages.

Bear Indicators: NYSE A-D trending down, more 52 week lows than highs, Global Dow is well below its 30 week moving average, and the Dow showed strength while the NYSE showed weakness in the A-D and 52 week highs.