Longer-Term Outlook

The charts will be updated by every Saturday. When no change to text, [NC] will be used. 

[NC]  The longer-term indicators below shows a slight DOWN MARKET, within an intermediate-term BEAR CYCLE, within a longer-term BEAR TREND.  A BEAR MARKET is underway, as indicated in comments on the bull or bear market way below along with a chart from 1871.

Monthly 20-Year Chart

[NC]  This chart gives a long-term perspective on the current action. A BEAR TREND started during the week ending 2/4/2022 when the MACD cross occurred. The bull trend that started on 7/10/2020 is over. 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 coronavirus affect on the economy. This caused the start of a bear cycle, which preceded a long bull cycle. Now the MACD has dropped down to again indicate we are in a BEAR CYCLE.

[NC]  Although an RSI over 70 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 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 chart below shows that the A-D Line had not been making new highs in November/December, whereas the Russell 1000 Index kept going up. This divergence has preceded market drops in the past and is again doing so.

[NC]  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 above includes all stocks on the New York Stock Exchange. The Price Percentage Oscillator (PPO) is equivalent to the MACD and it is below zero predicting a down move in the market.

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 - DOWN
  • Daily S&P 500 Moving Averages - DOWN in a BEAR Cycle
    • Bull: price above 200-day SMA
    • Bear: price below 200-day SMA - BEAR
    • UP: Both 50-day & 200-day SMAs moving up
    • DOWN: Both SMAs moving down - DOWN
    • MIXED: averages not moving together 
  • Daily Small-Cap (IWM) Moving Averages - DOWN in a BEAR Cycle
    • Bull: price above 200-day SMA 
    • Bear: price below 200-day SMA - BEAR
    • UP: Both 50-day & 200-day SMAs moving up
    • DOWN: Both SMAs moving down - DOWN
    • MIXED: averages not moving together
  • Weekly MACD(5,26,0) Histogram + or - (see chart above) - BEAR Cycle 
  • Percent of S&P 500 stocks above their 200-day EMAs greater or less than 58% - BEAR Cycle

  • Market Leadership (relative strength) - UP
    • Small cap stocks generally lead large caps - DOWN
    • Growth stocks lead value stocks (large-cap) - UP  (this is strange!)
    • 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 70 for three days - DOWN
    • 3-day MA of Nasdaq NH-NL positive or negative - DOWN

  • Consensus of the above  - DOWN (6 out of 7 ) in a BEAR Cycle 

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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. However on May 16th, from the intra day high to the intraday low the S&P 500 dropped 21.10%. Also the Nasdaq had dropped 32.25% and the small-cap IWM has dropped 30.66%. Therefore, a bear market is well underway.

[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. Note that the percentages shown are the amounts above or below the regression line. The market is currently way above this line. At some time it is likely to move below it -- the next primary bear market.

The source of these charts is given at the uppper right of the chart. This page is for amusement only, and should not be taken as advice to buy or sell anything.