Wednesday, August 06, 2014


Today I'd like to update my views on the current trend in the US stock market. Above this post you will find daily charts of my favorite three trend indicators. The bottom chart shows the cumulative advance-decline line for New York Stock Exchange issues.

Last week I explained why I thought the market was just beginning a substantial drop. Since then prices have moved generally lower. The Dow (top chart) has actually reached its 200 day moving average. I think the S&P will do the same before this break is complete. This would put the Dow substantially below its 200 day moving average, a potentially long term bearish development.

The top of this market occurred at the extreme outer limits of George Lindsay's long time period from bear market low to bull market top and also at the outer limit of an extended basic advance from the October 4, 2011 low. Moreover there were several small three peaks and a domed house formations which formed their points 23, the top of the domed house, with the Dow's top in mid-July. At the very least this implies that the Dow will drop below its April low and quite possibly below its October 2013 low. Needless to say a drop below the October 2013 low would mean that a bear market is underway.

I am not commenting this week on the five stocks I have been following on this blog. The only one which concerns me is Visa which has once again dropped below its 200 day moving average. This to my mind is bearish especially since V made its top for this cycle back in January and since has refused to follow the Dow and S&P higher. I am abandoning my 252 target for V and think V is likely to drop to 180 or possibly to 160 before the smoke clears.

1 comment:

Tim- said...

You called the bull market in SHLD pretty close to its top if i remember, quite the call you made now that i think about it.