Longer-Term Outlook
The charts will be updated by
every
Saturday. When no change to text, [NC] will be used.
The longer-term
indicators
below shows a DOWN MARKET, within an
intermediate-term BULL CYCLE, within a longer-term BULL
TREND. A BULL MARKET
is underway as the S&P 500 index crossed above its July peak.
Monthly 20-Year Chart
[NC] This chart gives a long-term perspective on the current action. A BULL TREND started
during the week ending 5/19/2023 when the MACD cross occurred. There
was a close call for a bear trend to start, but that didn't happen as
shown by the expanded view at the right. Included
in the chart are the 12-month and 36-month simple moving
averages. The MACD is based on the difference between the 8 and
30-month exponential moving averages with a red 7-month EMA of the
MACD, the signal line. Crossovers indicate a change in the primary
trend and seem to be a good indication of where the market is going.
The window at the right gives a magnified view of the recent monthly
action.
Weekly Four-Year Chart
[NC] Below
is a weekly chart of the S&P 500 index. A
record
high occurred on 2/19/2020. Then a serious crash occurred due to the
fear of the corona virus affect on the economy. This caused the start of
a bear cycle, which preceded a long bull cycle. In February 2022 the
MACD dropped down to again indicate a bear cycle. Since the later part
of 2022 an up-channel is carrying the market higher, however, this
channel was broken in the week ending 10/20/2023. The MACD broke below
zero during that week indicating that a bear cycle started. A BULL CYCLE is underway during this favorable time of the year. The
RSI is above 70, which shows positive momentum, but an overbought
market
on a weekly basis. Staying overbought means a strong market. The
index is at the top of the channel where it has dropped in the past to
consolidate the gains.
[NC] When the RSI is over 70 it
indicates an
overbought market, the pros like the high momentum and buy more. The market can stay "overbought" for quite a while
in a
strong market. The red down-arrows indicate when the 9-week RSI
drops below 70 -- perhaps a time to take some short-term profits thus
reducing risk. The MACD shows when the bull and bear cycles occur -- a
rise above or below zero. The cycle determination is explained in
more detail on the Observations page. A weekly chart should be
used to determine the market trend. Then a daily chart can be used to
time entries or exits.
Chart of Advances - Declines
[NC] Most of the indexes are capitalized
weighted. That means that large-cap stocks are given the most
weight and smaller-capitalization stocks don't contribute much to the
index. The Advance-Decline Line takes all stocks into
consideration in an equal-weighted manner. The
Russell 1000 Index tracks the 1000 top largest companies by market
capitalization in the United States, which represent about 90% of the
total market capitalization of the Russell 3000 Index. The
Advance-Decline Line is a breadth indicator based on net advances,
which is the number of advancing stocks less the number of declining
stocks. The A-D Line includes all stocks on the New York Stock
Exchange.
The Percentage Price Oscillator (PPO) is equivalent to the
MACD and it
went above zero on Friday Nov 16 predicting an up move in the market, which did occur.
The A-D line just barely exceeded the July high, but the stock
index continued up. This was not a good sign as the small and mid-cap
stocks were not participating
in the rally. The A-D line was moving up and the percentage price
oscillator (PPO) is positive to show broader participation in the
rally. Now things seem to have reversed to the downside.
Basis of UP/DOWN and BULL/BEAR Cycle Indications
The technical indicators listed below give a feeling for the strength
of the overall market and whether there are signs of a turn. A good
confirmation of a turn from bullish to bearish is the 52-week new
lows exceeding the thresholds below.
- Price Trend of S&P 500 - UP
- Daily S&P 500 Moving Averages - UP in
a BULL Cycle
- Bull: price above 200-day SMA - BULL
- Bear: price below 200-day SMA -
- UP: Both 50-day & 200-day SMAs moving up - UP
- DOWN: Both SMAs moving down -
- MIXED: averages not moving together -
- Daily Small-Cap (IWM) Moving Averages - MIXED in
a BULL Cycle
- Bull: price above 200-day SMA - BULL
- Bear: price below 200-day SMA -
- UP: Both 50-day & 200-day SMAs moving up
- DOWN: Both SMAs moving down -
- MIXED: averages not moving together - MIXED
- Weekly MACD(5,26,0) Histogram + or - (see chart above) - BULL
- Percent of S&P 500 stocks above their 200-day EMAs
greater or less than 55% - BULL
- Market Leadership (relative strength) - UP
- Small cap stocks generally lead large caps - DOWN
- Growth stocks lead value stocks (large-cap)
- UP
- Technicals (QQEW, equal-weight Nasdaq 100) tend to
lead
the general market (RSP, equal-weight S&P 500) - UP
- McClellan Summation of Advances & Declines of Nasdaq
(slope) - DOWN
- S&P 500 Accumulation/Distribution - above or below
its 20-day EMA - DOWN
- 52-Week Highs and Lows (excluding ETFs) - DOWN
- NYSE New Lows - UP if less than 45 for three days
- DOWN
- Nasdaq New Lows - Up if less than 100 for three
days - DOWN
- 3-day MA of Nasdaq NH-NL positive or negative - DOWN
-
- Consensus of the above
- DOWN (4 out of 7) in a Bull Cycle
- - - -
-
- -
Bull or
Bear
Market?
[NC] A
bear
market is generally considered to be a drop of greater than 20% from
the last major closing high in the S&P 500 index. That did
occur in 2022 with a drop from the all-time high on Jan 3, 2022 (shown in the chart)
to a low on October 13th. That was a 23.4% drop in the S&P 500
index on a closing basis. Then a 23.6% rally took the index to a high
on July 27, 2023.
[NC] The S&P 500 posted its highest close of 2023 on
Thursday Dec 28, 2023, which basically equalled its record close on
January
3, 2022. When the index went above its July 27, 2023
close a bull market. was declared.
[NC] The chart
below gives a really
long term perspective. These are true bull and bear markets and are
shown by the blue and red colors, respectively. The recent "dip" does
not look very significant on this chart.
The source of these
charts is given at the upper right of the chart. This
page is for amusement only, and should not be taken as advice to buy or
sell anything.
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