LONGER-TERM INDICATORS ARE STILL NEGATIVE -- % NYSE STOCKS ABOVE 200-DAY AVERAGE STILL IN BEAR TERRITORY -- SO ARE WEEKLY AND MONTHLY MACD LINES -- TODAY'S BREAKING OF SUPPORT IS TURNING SHORT-TERM TREND LOWER
NYSE % ABOVE 200 MA STILL IN BEAR MARKET... I'm going to focus on some longer term indicators today. And, right now, the ones I'm looking at still warrant a lot of caution. Chart 1, for example, shows the % NYSE stocks trading above their 200-day moving average ($NYA200R). Generally speaking, the line has to be above 50% to be in an uptrend. In other words, more than half of NYSE stocks need to be above their 200-day averages. But I prefer to use the 60% and 40% lines. During market corrections, it's not unusual for the black line to drop to 40% before turning back up again. Drops below 40% usual signal a bear market. Moves back above 60% reinstate the major uptrend. That's especially true after a bear market. The green circles show that happening in spring 2003 and 2009. The red circles show the last two drops below 40% to be in late 2007 and this summer. The value of the indicator is only 30%. That's nowhere near bull market territory.
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Chart 1
WEEKLY MACD LINE STILL BELOW ZERO LINE... When studying MACD lines, we generally plot two lines. When the faster MACD line crosses above the slower signal line, the trend is up. Those two weekly lines have turned positive for the S&P 500. Another way to use that indicator is to plot the MACD line by itself in order to see whether or not it's above or below its zero line. Chart 2 plots the MACD line by itself. The horizontal line is its zero line. The red circles show prior bear signals during 2000 and the end of 2007 when the zero line was broken to the downside. Bullish upside crossings took place in 2003 and 2009 (green circles). At the moment, the weekly MACD line is below the zero line. It has to cross back above to give a bullish signal.
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Chart 2
MONTHY MACD LINES ARE NEGATIVE... Chart 3 shows the two monthly MACD lines having turned negative. That reverses the last major buy signal given during the summer of 2009 (up arrow). Chart 4 shows that the two prior downside monthly crossings took place during 2000 and the start of 2008. That doesn't mean that we'll necessarily see a repeat of those bear markes. But it does raise the risk level for the market's major trend. That heightened risk condition will remain intact until the two monthly lines turn positive.
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Chart 3
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Chart 4
SHORT-TERM TREND WEAKENS... Those longer-term indicators are intended to put the market's short-term trend in better perspective, and to suggest that the recent short-term uptrend is finally being impacted by those larger negative trends. The S&P 500 has been trying unsuccessfully to stay above its falling 200-day moving average. The fact that the 200-day average is declining is in itself a negative sign. Also the fact that the 50-day average remains below the 200-day. Last Friday, I showed the S&P 500 trading sideways in a "pennant" or small "triangle" pattern. Chart 5 shows the lower line being broken today. That could put an end the market's rally attempt. A drop below the 50-day average would be further confirmation that the market's short-term is weakening as well. The MACD lines below Chart 5 are also turning negative.
