No surprise here! All indicators are firmly negative. I remain on the sidelines.
1 - 3. Major indexes vs. their 30 week moving averages. All three indexes blew down past their 30 week moving averages.
4. Convergence of NYSE AD and DOW. Both moved down this week. Click here to see Barron's chart.
5. NYSE 200 day Moving Average.The NYSE dropped well below its 200 day moving average.
7. NYSE 52 Week High Low vs. Dow Convergence/Divergence. This
week the NYSE 52 Week High/Low Differential was down (see above chart
in #6) and the Dow moved Down (see #1). Both agree in the downward
direction.
8. International Markets. The Global Dow is still way below its 30 week moving average.
9. Cost of a Dividend on the DOW. Still costly at 36.36.
This week ended down with all 9 indicators in the dumps. As a refresher, the reason we look at the 9 indicators is to get a sense of the overall market direction. If they are all flashing down like they are this week, then we know this is not a good time to buy new stocks for a trade (shorter duration of holding the stock) because it is very possible the market will go down further.
I am staying on the sidelines with my discretionary stock money but continuing to do my monthly investing in long term mutual funds. Long term, as in I won't need the money for many years and therefore will take advantage of dollar cost averaging in a down market.
1 - 3. Major indexes vs. their 30 week moving averages. All three indexes blew down past their 30 week moving averages.
4. Convergence of NYSE AD and DOW. Both moved down this week. Click here to see Barron's chart.
5. NYSE 200 day Moving Average.The NYSE dropped well below its 200 day moving average.
6. NYSE 52 Week High vs. Lows. We have a pretty solid streak of more new lows than highs. This pattern has been in place for at least 6 months and shows weakness in the market.
7. NYSE 52 Week High Low vs. Dow Convergence/Divergence. This week the NYSE 52 Week High/Low Differential was down (see above chart in #6) and the Dow moved Down (see #1). Both agree in the downward direction.
8. International Markets. The Global Dow is still way below its 30 week moving average.
9. Cost of a Dividend on the DOW. Still costly at 37.
This indicator measures what it costs to buy a dollar’s worth of
dividend. It is a very long indicator and could signal action a year in
advance. Do not use this indicator alone! Combine it with the others.
How to calculate:
- Obtain the current yield on the DJIA
- Get the DJIA close number for the week.
- Multiply the results of #1 and #2.
- Divide by the close #.
So the formula is simple and looks like this:
(“DJIA Yield” x “DJIA Close” ) / “DJIA Close”.
For the week ending 01/01/2016, the result is 39.22 and is considered overvalued.
Here’s how we get there (2.55% x 17425)/ 17265 = 39.37
I use Barron’s site to get my data at this link.
Here is a chart to illustrate the valuation metrics.
| Price/ Dividend Ratio |
Resulting Interpretation |
| 14 to 17 |
Bargain |
| 26 to 29 |
Dangerous |
| Above 29 |
Extremely Overvalued |
Cheers to the end of 2015 which ended down (Dow -2.2%, NYSE - 6.4%, S&P -.7%) with the exception of the NasDaq which ended the year with a 5.7% gain.
Look at this chart off Google Finance and you can see the indexes moved in concert to each other however, the Nasdaq won the race.
The weekly indicators for the last week of the year are showing continued weakness. Those that had improvement last week popped back down this week. I continue to remain on the sidelines and wait to see what 2016 will bring us!
1 - 3. Major indexes vs. their 30 week moving averages.The trend is still down even if they are slightly above their moving average line, it is a weak showing and note the moving average lines are sloping down, not up.
4. Convergence of NYSE AD and DOW. Both moved down this week.
5. NYSE 200 day Moving Average. This indicator was up for a bit, but moved underneath its moving average this week.
6. NYSE 52 Week High vs. Lows. This indicator popped up this week, but we need more than one week to make a trend.
7. NYSE 52 Week High Low vs. Dow Convergence/Divergence. This week the NYSE eeked out a positive differential (see above chart in #6), while the Dow moved Down (see #1). This is can be a positive signal but this week the change is small and note the overall trend is is weak.
8. International Markets. The Global Dow is still way below its 30 week moving average.
9. Cost of a Dividend on the DOW. Still costly at 39.22
That wraps it up! I am patiently sitting on the sidelines. This is a good time to scout out potential new stocks and to get some reading in. Happy New Year!
When gauging the weekly market breadth, it is important to include a
view outside of the United States. The Global Dow is reviewed to see if
it is moving in the same direction as the Dow, NYSE, Nasdaq and SPY
indexes. I take a weekly view and see if it is above or below its 30
week moving average, and to see if it is moving in the same direction as the US Markets. As of this post, the Global Dow continues to struggle. It has been below its 30 week moving average for months, and, the moving average line is sloping down. Both are bear signals.
Links:
This was a short week on the stock market with the Christmas holiday. The indicators are showing some small improvements, however, it is just a nudge and is not necessarily a positive sign. The market needs to play its hand for a couple of more weeks before we will get any real sense of direction.
Major Indexes Above their 30 Week Moving Averages
Dow and the NYSE A-D line both positive for the week
NYSE close touched just below the 200 day moving average.
NYSE 52 week Highs are still lower than the 52 week Lows. This shows continued weakness in the market.
NYSE 52 Week High Low vs. Dow are converging in the upward direction.
Global Dow (GDOW) remains well below its 30 week moving average.
Dow price to dividend ratio remains extremely overvalued.
Building on the post about the NYSE 52 Week Highs/Lows indicator, I will explain why it’s
helpful to gauge it against the Dow’s closing numbers each week. This is
a simple but effective tool. If the NYSE 52 Week H-L is divergent from
the direction of the Dow then we can see signs of a possible change
coming.
This year this gauge flashed a strong indication in the spring. This
is where we start to see back to back weeks of negative divergence on
the NYSE 52 week H-L even though the Dow was experiencing gains. News at
this time was also positive.
I like to create my own charts. See below for an example of the Dow
moving higher (green line on top chart) vs. the NYSE 52 week high-low
trending lower (red line on bottom chart).
If we examine the current chart from last Friday (Dec 17, 2015) we can see that both the Dow and the NYSE 52 week highs and lows are in negative territory. The Dow is below its 30 week moving average and the NYSE 52 week Hi Low Differential shows the index has more new lows than highs for the last 3 weeks. When the two indicators flash a negative sign, that is worth paying attention to as well. We are in bear land for now.
