Nearly all of our indicators turned bearish in the last two weeks. The breakdown of the Standard & Poors 500 Index ($SPX) below support at 1680 was the trigger that turned the $SPX chart negative.
However, market breadth is already oversold, and buy signals are beginning to appear from these indicators.
The Standard & Poors 500 Index ($SPX)) broke down below the important support level of 1670-1680 today and, in doing so, unleashed a torrent of sell signals. The picture has changed to intermediate-term negative.
The equity-only put-call ratios are split. The weighted ratio made new lows recently, trading at its lowest prices in over a year. Then it curled up, in a sell signal. The standard ratio remains on a buy.
The recent pattern of a late-day rally was broken yesterday, and it may have larger ramifications. Prices declined mostly all day yesterday, and it was especially significant that a rally that began at about 3pm was suddenly aborted and instead prices traded down and closed at the daily lows.
The feature article deals with two indicators that we have occasionally referenced. They are long- to intermediate-term indicators and both are either on a sell signal or on the verge of one. The studies involving these indicators were much more complicated than normal systems because of the longer-term nature of the holding period.
The overbought conditions that had existed a couple of weeks ago were largely worked off by a sideways to slightly down stock market, as measured by the Standard & Poors 500 Index ($SPX). It seems that the bears had their chance, but didn't seize it once again. There is strong support in the 1670-1680 area.
Equity-only put-call ratios remain on buy signals. Note the charts if Figures 2 and 3.
Two indicators that we have only briefly discussed in the past are now at an overbought state. Since each has merit, it was decided that a study should be done on the data to see if there was some usefulness other than just yet another overbought indicator. Sometimes when one looks at data in just the right way, a new thought for an indicator will jump into one’s head, and that’s pretty much how these came about.
Stock market bulls are keeping the upside pressure on, forcing short covering and other unwanted maneuvers from the bears’ point of view.
The stock market has proved to be very resilient once again. Overbought conditions -- which looked formidable a couple of weeks ago -- have mostly abated with only a slight downward (and mostly sideways) move by the Standard & Poors Index ($SPX). Now, new highs have been registered, and the bears can only lament once again that they failed to capitalize.
$SPX has support in the 1670-1675 area, which is the area of daily lows several times in July.
