With a sharp decline the last two weeks, all indicators are in bear mode. The indicator summary turned negative last Friday (-4) and moved to -10 this week. Oversold conditions and excessive bearish sentiment are the only positives in the stock market right now. This may produce an oversold bounce, but much more is needed to turn the indicator summary positive again. Namely, the AD Lines, AD Volume Lines and major index ETFs established important resistance levels with their mid June highs. A break above these levels is needed to reverse the current downtrends. Indicator details after the jump.
- AD Lines: Bearish. The Nasdaq AD Line failed to break above its late May high and declined below its February low. The NYSE AD Line is holding up much better, but it formed a lower high in mid June and is now testing support from the late May-early June lows.
- AD Volume Lines: Bearish. The Nasdaq AD Volume Line formed a lower high in mid June and broke below its February low. The NYSE AD Volume Line broke below its May-June lows.
- Net New Highs: Bearish. Net New Highs for the Nasdaq dipped below -200 and the cumulative Net New Highs line has been trending down since mid May. NYSE Net New Highs dipped below -100, but the cumulative Net New Highs line remains flat.
- Bullish Percent Indices: Bearish. On the BPIs for consumer staples, utilities and telecom remain above 50%. BPIs for the major indices and other sectors are below 50%.
- Sentiment: Bearish. The S&P 500 Volatility Index ($VIX) and Nasdaq 100 Volatility Index ($VXN) formed higher lows in mid June and surged over the last two weeks. These higher lows formed near broken resistance. Volatility is trending up and this is negative for stocks.
- Trend Structure: Bearish. The major index ETFs formed lower highs in mid June and broke below their prior reaction lows (late May and early June). Downtrends are now clear and present.
- SPY Momentum: Bearish. The Aroon Oscillator is back in negative territory. MACD hit resistance at the zero line and turned back down in mid June. RSI also hit resistance in the 50-60 zone and turned back down.
- Offensive Sector Performance: Bearish. Relative weakness in the consumer discretionary and technology sectors is negative for the market overall.
- Nasdaq Performance: Bearish. The $COMPQ:$NYA ratio broke below its May-June lows.
- Small-cap Performance: Bearish. The $RUT:$OEX ratio has been moving lower since April.
- Breadth Charts have been updated (click here)
About the author:
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
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