Thursday, July 31, 2014

danger ahead

Here are daily charts of my three favorite trend indicators: the Dow Industrials, the S&P 500, and the NYSE advance-decline line.

As I write this all three are below their 50 day moving averages (green lines, red arrows). Assuming they stay below them for the next couple of days I think this means that the Dow and the S&P are headed for their 200 day moving averages (red lines and green arrows) and quite possibly below them.

This "sell signal" from the 50 day moving averages should be taken seriously. The bull market in the US stock market has lasted more than 5 years from its inception in March of 2009. This is an unusually long bull run and Lindsay's 15 year period and extended advance measurements underline this fact.


Carl Fredrik said...

My guess is that it will bounce back next week. Nasdaq looks oversold in the weekly frame, but risk of more downside, sure.

Samuel Chetty said...

Hi Carl,
I agree that we're in a correction. I think it is bearish that the market acted unimpressed by the strong GDP report, plunged the next day, then sold off more after a jobs report that, while not spectacular, was still above average for this recovery cycle. It seems that the market already has an economic acceleration priced in.

Also, the Dow's ugly, messy rally since February is scary.

My thought is that we are in Elliott Wave 4 (with Wave 2 in 2011), which fits with your Lindsay analysis well. On the Dow, it looks like Wave 4 started in January and is taking the form of an expanded flat.