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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[NC] Risk management isn’t about being right. It’s about protecting capital when you’re wrong. -- Lance Roberts
S&P 500 hit an all-time high on Tuesday 1/4/2022. The
indicators for the equity market show a down
market within a bear cycle in a bear
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 way below its 200-day moving average as is the stock index. Click here to check it out.[NC] A bear market is underway
as, from the intermarket high to low for the S&P 500 on 5/16/2022, the drop was
21.10%, for the Nasdaq it was 32.25%, for the small-cap IWM it was
The S&P 500 index closed down 5.79% for the week, after being down 5.05% the previous week. The
closed down 4.78% for the week, after being down 5.60% the previous week.
The small caps closed down 7.51% for the week, after being down 4.28% the previous week.
11.6% of S&P
500 stocks were above their 200-day exponential moving averages, down
from 25.8% the week before. 2.2% of these stocks were
above their 50-day EMAs, down from 12.4% the week before. 12.5%
Nasdaq stocks were above their 50-day EMAs, down from 19.7% the
before (see chart). [NC] For 2021, the SPY was up 28.7%; the Nasdaq QQQ was up
27.4%; the mid-cap IWR was up 22.4%; and the small cap IWM was up 14.5%.
percent moves by some primary
exchange-traded funds are shown ranked by their one-month
(Chart from FundBuster.com.)
Note that PDBC is the Commodity Index Tracking ETF (so no IRS K1 form involved).
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.
The Power Zone,
the favorable time of the year, ended early on 4/8/2022.
The Power Zone typically starts sometime
in October and
ends sometime in May. See the Market Cycles page for more. The Bear
Cycle that started on 1/21/2022 continues. Charts for the second
of the presidential cycle are shown on the Cycles page. June is usually a down month in general and especially in this presidential cycle year..
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 Shiller 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 on
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
relationship between the market and its long-term regression line can be seen here. It is way
above the line, which means it may at some time revert back to that
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. Below 50 indicates negative momentum. A divergence with
price is an indication that the price trend is likely to
14.6% drop from the all-time high in January ended in March when a
rally took the index above
it's 200-day MA and the previous February highs. That rally ended with
a huge 17% drop below both moving averages as shown. The bear market
correction rally is now over. The Bear Market continues! The Fear & Greed Index shows fear.
Russell 2000 small-cap index (shown by IWM) had been in a horizontal
channel for a year. It broke below this channel with a death cross
of the 50-day MA crossing below the 200-day MA. The RSI showed a way
oversold small-cap market, and a short-term correction of this dramatic
down swing occurred resulting in the bearish flag formation shown.
After consolidation and a large 19% drop, the correction of that drop is now over.
technology-heavy Nasdaq composite index hit a new all-time high on November 22, 2021. It then dropped below its 200-day
MA and a death cross
occurred on 2/17/2022. After a double bottom in March
the index rallied above it's 50-day MA. Then the bear market continued
with a correction of the large 24% drop. That is over and the bear
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 in March
2020. The quick drop since then accelerated and ended with a double bottom in the spring of 2021.
The 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 due to falling bond prices.
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 agriculturals. A
falling dollar helps commodity prices.
[NC] The price of gold
had risen dramatically until the several year pull-back. The gold
and silver miner ETFs (GDX and SIL) had gone up even more. Now they are correcting from the breakout shown.
Commodities continue to rise due to the war, which is increasing inflation. A good ETF to invest in commodities is PDBC. Oil prices soared to a high of $130
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%.
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