Health of the Market
The charts will be updated by
every Saturday. When no change to text, [NC] will be used. Click
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is part of
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Belvedere Investors' Forum. Note:
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indicators for the equity market show a up
market within a bull cycle
in a bull
trend, and in a bear market (see
definitions on Longer
Term page). The plot of the advancing stocks less the declining
stocks on the
NYSE is moving up, which means most of the stocks are going up.
Click here to check it out.
500 index closed up 1.00% for the week, after being up 2.24%
the previous week. The
closed up 0.89% for the week, after being up 2.37% the
The small caps closed up 0.58% for the week, after being down 5.43% the previous week. The
"market" is expecting no more Federal Funds Rate increases after the
Wednesday 11/1 meeting announcements and the good CPI report.
59.0% of S&P
500 stocks were above their 200-day exponential moving averages, up
from 55.6% the week before. 75.4% of these stocks were
above their 50-day EMAs, up from 70.4% the week before. 54.6%
Nasdaq stocks were above their 50-day EMAs, up from 50.3% the
before (see chart).
Cycle started the week ending 11/10 after a short bear cycle that started 10/20. The previous bull cycle started 3/17/2023. A Bull Trend was signaled 11/17.
A VIX Buy Alert occurred on Thursday 11/2, and the Bullish Percent Buy Alert was signaled on 11/3, both shown on the Market
Status page. Charts for the third
of the presidential cycle are shown on the Cycles
page. December has been very good in general and in presidential year three.
The 10-year Treasury yield is below the 2-year AND
3-month yield, which is an inverted yield curve. This
generally precedes a recession by several months. See more on the Income
page. The Power Zone,
the favorable time of the year, started on November 3. The Power
Zone typically starts sometime
in October and
ends sometime in May. See the Market Cycles page for more.
Lance Roberts on 5/20/23 reminds us that over the next few years, the
environment will look different than in the past.
1. The economy is returning to a slow growth environment
with a risk of recession.
2. Inflation is falling, meaning less pricing power for
3. No artificial stimulus to support demand.
4. Over the last two years, the pull forward of
consumption will now drag on future demand.
5. Interest rates are substantially higher, impacting
6. Consumers have sharply reduced savings and higher debt.
7. Previous inventory droughts are now surpluses.
[NC] This website follows the markets and does not presume to
factor in economic conditions. Buyer beware!
[NC] Market timing is discussed on the Observations
page -- does it work? Consider dollar-cost-averaging over
a month or so to gain access to the market -- if you have missed the
buy-low point (which most people do).
three-month performance chart of the Nasdaq QQQ
exchange-traded fund is
below. QQQ delivers a mash-up of tech, growth and large-cap exposure
that excludes financial stocks. The fund and index are rebalanced
quarterly and reconstituted annually.
CNN Fear &
gives an interesting perspective on the internals of the market. The
trend of the components of this index are important to gauge the trends
of the market.
A measure to
determine if the price is too high relative to the underlying
earnings is the Schiller price to earning ratio. This is the current
price divided by the 10-year average of "real" (inflation-adjusted)
earnings. This ratio corresponds quite well to the peaks of price
as shown by charts on this site.
John Murphy of StockCharts.com asks "Why
look at charts?" - They provide the most up-do-date information
state of the stock market. They may also be telling us something about
the fundamental reports we won't be getting until much later.
Charts track forward-looking markets, while fundamental data is
backward looking. It's always safer to look out of the front window of
your car while driving to see where you're going. Not the back window
that shows you where you've already been."
A chart from 1870 that shows the
major market swings can be seen here.
Stock Market Action
The large-capitalization S&P 500
index is shown with its gray Bollinger
Bands below. The
bands are two standard deviations above & below a 20-day simple
moving average. When the price goes above or
near the edge of the upper Bollinger Band a downswing in
is likely as the market is overbought. Similarly, when the
price goes below the lower band, the market is oversold, and an
upswing is likely. The 14-day RSI is a measure of the price
momentum. Above 50 indicates positive momentum. A divergence
price is an indication that the price trend is likely to
Head & Shoulders Top formed with a broken neckline that
indicates a drop to the next resistance level around 4190 is likely,
which did occur. Traditionally the 6%
move from the July peak to the neckline means that a similar downside
move would be a minimum downside objective of around 4080. That occurred also and the pattern move is over.
The week ending 11/3 was a
great week with the index rising 5.85% to cross the 50-day MA. That
move continued to cross another resistance area. The market is
overbought according to the RSI.
S&P 500 index is a capitalization-weighted index, meaning the
larger cap stocks are given the most weight
in the index. Market cap is calculated by multiplying the number
of stock shares a company has outstanding by its current stock price.
The stocks in the index include companies in eleven sectors to offer a
picture of the health of the U.S. stock market. However, the
six largest companies make up 27% of the value of the index.
These are Microsoft, Apple, Amazon, Nvidia, Alphabet (Google) and Meta
(Facebook). To get a clearer picture of what all the 500 stocks
doing, an equal-weight index can be used. Less the six high-flying tech
stocks, the other 494 have not been doing as well.
[NC] The chart below shows an equal-weight performance version of
the S&P 500
(RSP) in red together with
the cap-weighted version (SPY) in black. The
moving averages are for RSP and show a death cross on 10/18. The
percentage scale shows that the equal-weight version has dropped more
cap-weight version since the peak on July 31. This is shown by the
percentage curve at the bottom that was rising during this time. Since
the low on March 13 at the beginning of the chart, the SPY rose 13.6%
more than the equal-weight RSP, which is a negative indication for the market. Now the relative performance of the SPY is dropping -- a good sign that the average stock is participating in the rally.
[NC] Small-cap stocks, represented by the iShares
Russell 2000 Small Cap ETF (IWM), are not typically traded by
computerized programs. They are
traded by individuals and as such offer us a look at what individual
investors are thinking instead of the big trading firms. Small caps
hitting a new low tells us investors are selling, continuously selling.
Not a good thing for the stock market looking forward. From FibTimer.com.
summer action resulted in a Head & Shoulders pattern where the
neckline was broken on 9/19. The drop is likely to extend at least to
the support line shown -- which was broken Friday 10/20. On 10/16 a
Death Cross occurred.
The week ending 11/3 there were two dramatic days after the Fed
meeting when the "market" assumed that interest rate hikes are over.
Since then it went down to the support line shown. This
small-cap index gapped up dramatically on Tuesday 11/14 and is
consolidating just under the 200-day MA.
technology-heavy Nasdaq composite index had a dramatic up move in early
move ended with a Head & Shoulders pattern. The neckline
broke, but this pattern move is over as the index went up after. The
"market" is assuming that there will be no more Fed Funds Rate rises so
the market rallied dramatically. The market is overbought now.
exchange traded funds (ETFs) is popular. The traders rotate
between sectors. To see how some popular sector ETFs are
doing, click here for the Candle Glance of two-month
charts. The charts include the StockCharts
Technical Ranking (SCTR). The sector ETFs used in the Candle Glance
Here is a map of popular ETFs
arranged in significant groups. This
link gives gain or
in a week with a small chart when you hover over the group.
[NC] The international bond market is provided
by the WSJ. See the Income tab for a chart of U.S.
Treasury yields. 2020 ended with the 10-year treasury note at 0.93% and
the 2-year note yield was 0.13%.
stock markets in other countries can diversify a portfolio. To
participate in these markets, the U.S. dollar
can be hedged out. Click to check out the country hedged ETFs and the un-hedged ETFs.
Note that BSE SENSEX is an
India index, CAC 40 is France, FTSE 100 is a UK index, Nikkei 225 is
Japan, Hang Seng is Hong Kong, DAXK is Germany, and Shanghai is, of
falling dollar has a positive influence on the U.S. market, especially
large cap multinationals, as prices for our customers overseas are less
expensive. However, a weaker dollar makes product imports (some in
the supply chains) get more expensive. This has a negative effect on
dollar ($USD) and the 10-year Treasury rate ($TNX /10) are shown in a
chart with weekly closing prices. The earlier dollar rise peaked
2020. The quick 10.9% drop ended with a double
bottom in the spring of 2021. The huge 25.8% rally since then corrected
with a 12.2% drop. Now a rally is underway.
10-year Treasury rate
rose to a peak on 10/5/2018 and 11/8/2018 closing at
times. It hit a low in March and August 2020 around 0.5%. Now it is on
a long-term rise.
Ed Yardeni in the 2/9/19 Barron's
stated that, based on his 40 years of experience, he has never found
that supply-versus-demand analysis helped much in forecasting bond
yields. It's always been about actual inflation, expected
inflation, and how the Fed was likely to respond to both.
Also shown is the CRB Commodities
Index, which is a measure of inflation. This index is an unweighted
geometric average of prices across 17 commodities including energy,
grains, industrials, livestock, precious metals, and
The price of gold
had risen dramatically until the 2-year pull-back. The gold
and silver miners ETFs (GDX and SIL) had gone up even more. Now the
significant rise from the green arrow is consolidating.
The Federal Reserve controls the Federal Funds
Rate, which is the interest rate at which banks lend reserve balances
to other depository institutions overnight on an uncollateralized
basis. It also tends to effect longer-term rates. On 3/15/2020 an
rate cut set the benchmark interest rate between 0% and 0.25%. Now the
Fed is raising the rate as shown in the chart.
chart below gives an overview of the
situation. The market had done well since the termination of the QE3
Fed bond buying, until the last half of 2015. The 10-year
Treasury rates moved down as the Fed raised the over-night Federal
Funds Rate in December 2015. There were a total of nine 1/4 point
rate increases, the last one in December of 2018. The Fed cut the rate
at its July 2019 meeting, and more cuts followed as shown below. In May
2022 the Fed started to raise the rate to slow the economy to fight
various Treasury yields
since 1962 are shown on the Income tab.
The source of the
charts is located on the upper right of the chart. This page
is for amusement only, and should not be taken as advice to buy or sell