Headlines:
This week we saw the financial media and President Trump glorify the fact that the DJIA had exceeded 22,000 for the first time. It’s as if 22,000 meant something. Problem is it doesn’t, except for the fact that it attracted widespread media hype. It reminds me of a previous President toting victory with a “Mission Accomplished” sign behind his back. That one didn’t turn out too well. Since my longer-term indicators remain, for the most part, fully in the bullish camp, I am not saying we are just about to begin a new bear market. What I am saying though, is that it would not be surprising from a contrary viewpoint, to see some kind of a correction develop in the weeks ahead. That’s always a difficult call in a strong bull market, so my warning is more for leveraged short-term traders than longer-term investors.
Chart 1 features the New York Composite ($NYA) together with the NYSE Bullish Percent ($BPNYA) indicator. Most folks interpret this indicator from the point of view of its level. A high level is as good as it gets, and tends to be bearish, whereas a low level typically represents a buying opportunity. I certainly buy that approach, but I also think that trend is equally as important. In other words, when you see a trendline violation on a Bullish Percent Index (BPI), and this is confirmed by the price, it typically results in a worthwhile move for the $NYA. We see several successful signals using this approach and an obvious failure last June. On Friday, this series dropped below its November-August up trendline. That break is not quite decisive yet, but any additional weakness will make it so. Note also that the bullish percent has been tracing out a series of declining peaks, unlike the average which has been moving higher. That tells us that fewer and fewer issues have been participating in the rally. The breaking of the trendline indicates that this trend of fewer stocks in bullish trends is likely to extend. I would expect that trendline break to adversely affect the NYA, but the actual signal requires a drop below its November-August up trendline, say with a daily close under 11,800. Until that happens all bets for a correction in the Index are off.
August Market Round up webinar. That red trendline break confirms the false upside breakout and suggests that the BPI will move lower. Throughout this whole period, the S&P itself has managed to remain above its 2016-17 up trendline. If it drops below the trendline, this would confirm this week’s breakdown in the Bullish Percent Index. We look to a break below 2430 to confirm this, as such a break would also mean a violation of the 50-day MA.
Chart 5
Moreover, Chart 6 indicates that the upside Relative Strength (RS) breakout was a failure, and that the RS line has now dropped below a key red support trendline. Not a good sign for small caps!
Chart 7
This view is also supported by the fact that the Dollar Index has violated a steep down trendline and the short-term KST has gone bullish.
Chart 8
Good luck and good charting,
Martin J. Pring
- Bullish percent indicators are starting to deteriorate
- Short-term confidence may be turning
- Small caps getting smaller?
- Oversold Dollar Index bounces from support
This week we saw the financial media and President Trump glorify the fact that the DJIA had exceeded 22,000 for the first time. It’s as if 22,000 meant something. Problem is it doesn’t, except for the fact that it attracted widespread media hype. It reminds me of a previous President toting victory with a “Mission Accomplished” sign behind his back. That one didn’t turn out too well. Since my longer-term indicators remain, for the most part, fully in the bullish camp, I am not saying we are just about to begin a new bear market. What I am saying though, is that it would not be surprising from a contrary viewpoint, to see some kind of a correction develop in the weeks ahead. That’s always a difficult call in a strong bull market, so my warning is more for leveraged short-term traders than longer-term investors.
Chart 1 features the New York Composite ($NYA) together with the NYSE Bullish Percent ($BPNYA) indicator. Most folks interpret this indicator from the point of view of its level. A high level is as good as it gets, and tends to be bearish, whereas a low level typically represents a buying opportunity. I certainly buy that approach, but I also think that trend is equally as important. In other words, when you see a trendline violation on a Bullish Percent Index (BPI), and this is confirmed by the price, it typically results in a worthwhile move for the $NYA. We see several successful signals using this approach and an obvious failure last June. On Friday, this series dropped below its November-August up trendline. That break is not quite decisive yet, but any additional weakness will make it so. Note also that the bullish percent has been tracing out a series of declining peaks, unlike the average which has been moving higher. That tells us that fewer and fewer issues have been participating in the rally. The breaking of the trendline indicates that this trend of fewer stocks in bullish trends is likely to extend. I would expect that trendline break to adversely affect the NYA, but the actual signal requires a drop below its November-August up trendline, say with a daily close under 11,800. Until that happens all bets for a correction in the Index are off.
August Market Round up webinar. That red trendline break confirms the false upside breakout and suggests that the BPI will move lower. Throughout this whole period, the S&P itself has managed to remain above its 2016-17 up trendline. If it drops below the trendline, this would confirm this week’s breakdown in the Bullish Percent Index. We look to a break below 2430 to confirm this, as such a break would also mean a violation of the 50-day MA.
Chart 5Moreover, Chart 6 indicates that the upside Relative Strength (RS) breakout was a failure, and that the RS line has now dropped below a key red support trendline. Not a good sign for small caps!
Chart 7This view is also supported by the fact that the Dollar Index has violated a steep down trendline and the short-term KST has gone bullish.
Chart 8Good luck and good charting,
Martin J. Pring
(if not negative)
