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Trend table status

Trend

SP-500

R2000

COMPX

Primary

Up 7/31/20

?- 3/31/20

Up 5/29/20

Intermediate

Up 10/2/20

Up 8/21/20

Up 10/9/20

Sub-Intermediate

Up 10/15/20

? 10/21/20

Up 10/13/20

Short term

? 10/19/20

? 10/19/20

? 10/19/20


Don Worden of Worden Brothers (makers of Telechart software) used to keep a trend table before his health issues got in the way. I always found it useful. Mine is slightly different. Hopefully helpful. Up? or Dn? means loss of momentum. ? by itself means trend is neutral. ?+ or ?- means trend is neutral with bias of up(+) or down (-)

Thursday, January 21, 2016

Daily update 1/21 SPX monthly ADX says bear market on

The 20% rule of thumb for a bear market Wall Street uses is really an insane definition.  My definition is "a period of falling prices generally lasting 12 months or longer."  The actual amount of the decline is irrelevant for my purposes.  If stocks see a 15% draw down over two years it is a bear market isn't it? Yesterday SPX made a new closing low since the May high.  Nearly all bull market corrections (including the 87 crash) made their closing lows within six months of the price high.  Because of the brevity of the move down I don't consider 87 a true bear market.  It took a long time to get back to the highs, but prices were steadily rising.  Making a new low more then six months from the price high greatly raises the odds of being in a bear market. 


SPX stuck its head above yesterday's high, but found some sellers and could not stay there.  Given the oversold nature of this market that is probably not a good sign.  Breadth was +64% which was in the realm of a dead cat bounce.  One positive was that SPX closed above the Aug. low even it if was only by one point. 


The futures got above the 20 SMA once again today, but found nothing but sellers up there.  So far no strength goes unsold.  The bulls will have to do better then this to get a decent bounce going.


Yesterday USO printed a doji bar and today a strong move up on increasing volume.  It is possible oil has made a short term bottom.  A short covering bounce is not out of the question given the magnitude of the decline.  That should help stock bulls if that were to happen.  I would not expect this to be the ultimate price low no matter what happens here.  Nobody is cutting production while Iran is going to be putting more on the market.  Saudi Arabia said today the kingdom can stand low oil prices for a long time.  That was a strong warning. 

The bulls tried to build on yesterday's reversal, but fumbled the ball. Traders on TV seemed to be really disheartened by today's price action.  Draghi pretty much promised more action in March, oil rallied significantly after its inventory report and yet stocks floundered.  That is because we are in a global bear market for stocks.  Plain and simple.  However, it is not out of the question that the market bounces from here (maybe more likely with dejected traders).  We are very oversold and oil might actually have put in a short term bottom.  If oil rallies again tomorrow stock bulls might get a little more traction. 

Here is a look at the monthly SPX chart with ADX.


This month shows the ADX turning up with the -DI line above the +DI line.  For the last 100 years that has been a great indicator of being in a secular bear market.  I have maintained all along I thought we had not crossed into secular bull territory despite so many on Wall Street proclaiming such.  While this month's bar has not closed yet ADX uses the price high and low in the calculations so even a massive rally into month end is unlikely to change it much.  For a little more bear market confirmation the 6 SMA has clearly crossed below the 20.  There is no way of telling how long this cyclical bear market will last or how low prices will go, but there is no denying we are in a bear market.

Bob

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The information in this blog is provided for educational purposes only and is not to be construed as investment advice.