Even though the indicator summary flipped to positive last week, I noted that a sharp decline from current levels could easily flip a few indicators back to the bears. That is indeed what happened. With sharp declines this week, SPY, IWM and QQQQ failed at important resistance zones. The discrepancy between NYSE and Nasdaq breadth remains. Nasdaq breadth is much weaker than NYSE breadth. I am also concerned with relative weakness in the finance, consumer discretionary and technology sectors. The market moves since June have been quite sharp and this is causing the indicator summary to flip from positive to negative and back. Talk about "unusual uncertainty". A trend will take hold one of these weeks.
- AD Lines: Neutral. The NYSE AD Line moved to new highs in early August (bullish), but the Nasdaq AD Line formed a lower high in late July and early August (bearish).
- AD Volume Lines: Bearish. The Nasdaq AD Volume Line formed a lower high in late July (bearish) and the NYSE AD Volume Line did not hold its breakout (bearish).
- Net New Highs: Neutral. Nasdaq Net New Highs plunged below -100 this week and the cumulative Net New Highs line turned down (bearish). NYSE Net New Highs moved to zero, but the cumulative Net New Highs line remains well above its 10-day SMA (bullish).
- Bullish Percent Indices: Neutral. The Nasdaq BPI is below 50%, but the BPIs for the other major indices are still above 50%. Four of the nine sector BPIs are below 50%, including finance, consumer discretionary and technology.
- Sentiment: Bullish. The S&P 500 Volatility Index ($VIX) and Nasdaq 100 Volatility Index ($VXN) are still trending lower and have yet to break their mid July highs.
- Trend Structure: Bearish. DIA broke its June highs, but QQQQ, SPY and IWM failed at or below their June highs.
- SPY Momentum: Bullish. MACD(5,35,5) and Aroon remain in positive territory, but RSI moved below 50.
- Offensive Sector Performance: Bearish. The finance and consumer discretionary sectors are lagging, while the technology and industrials sectors are leading.
- Nasdaq Performance: Bearish. The $COMPQ:$NYA ratio has been moving lower since early June.
- 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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