Skip to main content

Can you still be a bull when this market's technicals are so awful?

The family wants me to watch the Super Bowl with them and stop this darn blogging. And you know, I think that's a pretty good idea so I'm just going provide a really abbreviated post that looks at our Alert HQ overall market statistics.

The following charts are derived from data collected during our Alert HQ process and they provide a high-level look at a couple of the indicators we track across the whole market.

The view from Alert HQ --

Let's start with our moving average analysis.


For this first chart we count the number of stocks above various moving averages and count the number of moving average crossovers, as well. We scan roughly 7000 stocks and ETFs each weekend and plot the results against a chart of the SPDR S&P 500 ETF (SPY).

This chart shows the broad-based deterioration in the market. Almost 70% of stocks are now below their 50-DMA. The number of cross-overs to the downside has accelerated. I don't show it on the charts but roughly 75% of stocks have fallen below their 20-DMA, as well. We are midway between the extreme levels as we saw in March 2009 and the levels we saw during the two pullbacks in 2009.

The next chart provides our trending analysis. It looks at the number of stocks in strong up-trends or down-trends based on Aroon analysis.


This chart tells a similar story. Current levels are midway between those seen at the market lows in March and during the pullbacks in September and November.

Conclusion - why I'm still a bull

OK, I have to ask: should the market be sinking to levels last seen when the fate of capitalism was in doubt and the financial system was teetering on the brink? I don't think so.

So the interpretation of these charts is that the market is greatly oversold. Unfortunately, markets can continue in an oversold mode until some catalyst changes investor sentiment. Luckily, we continue to see modest progress in U.S. economic reports. Improving fundamentals will eventually carry the day. As I said a week ago: do not short this market unless you're a trader.

Comments

Anonymous said…
interesting read. I would love to follow you on twitter. By the way, did you hear that some chinese hacker had busted twitter yesterday again.
Anonymous said…
great read. I would love to follow you on twitter. By the way, did any one know that some chinese hacker had hacked twitter yesterday again.
Anonymous said…
Hello. And Bye.

Popular posts from this blog

Brazil - in a bubble or on a roll?

A couple of years ago, no one recognized the real estate bubble even though it was under everyone's nose. Now, analysts and bloggers are seeing bubbles everywhere they look. One of them, they say is in Brazil whose Bovespa stock market index has doubled in the last 12 months. Does the bubble accusation hold water? I don't think so and here are 7 reasons why Brazil is by no means a bubble economy: Exports have held up over the past year thanks to demand from China for Brazil's soya exports and iron ore. This was helped by the the Brazilian government's drive to improve trade links with Asia and Africa. Export diversification, spurred by a more active trade policy and increased focus on "south-south" trade under current president Lula, helped mitigate the decline in demand from OECD (Organization for Economic Co-operation and Development) countries A "sensible" economic framework has been in place since the 1990's. This has included inflation

Trade Radar gets another update

Some of our data sources changed again and it impacted our ability to load fundamental/financial data. In response, we are rolling out a new version of the software: 7.1.24 The data sourcing issues are fixed and some dead links in the Chart menu were removed. So whether you are a registered user or someone engaged in the free trial, head over to our update page and download the latest version. The update page is here:   https://tradingstockalerts.com/software/downloadpatch Contact us if you have questions or identify any new issues.

Unlock Stock Market Profits - Key #1

This is the first in an ongoing series of articles where I discuss what I feel are keys to successful investing. It is based on a post that provides a summary of the ten keys that individual investors should use to identify profitable stock trades. ( Click here to read the original post ) There are two basic steps to investing. First, you need to find stocks that seem to have some potential. Then you have to determine whether these stocks are actually good investments. There are many stocks that at first glance look interesting, but further research reveals that there are too many negatives to warrant taking a position. This first post in the series starts at the beginning: getting good investment ideas. Key #1: If something special is happening to a stock, it will be reflected in some kind of unusual activity in the markets. As individual investors, we will never be the first to know; however, unusual activity can be an early sign that allows us to follow the Wall Street professional