Art's Charts

Indicator Summary Weakens along with Small Caps

Arthur Hill

Arthur Hill

Chief Technical Strategist,

The indicator summary dipped to +7 this week after two downgrades. The bulk of the evidence is still bullish, but a few indicators weakened with the April decline. The NYSE AD Line and AD Volume Line briefly broke their March lows. The Energy Bullish% Index ($BPENER) dipped below 50% to become the weakest sector. SPY momentum deteriorated and small-caps continued to underperform. The challenge of the indicator summary is to distinguish between corrections and the start of something bigger. Heck, this is the challenge with all pullbacks. For now, I have yet to see enough bearish evidence to turn medium-term bearish. However, note that the six month cycle is turning bearish and stocks are still ripe for a deeper correction, which could involve a deeper pullback or extended trading range.

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  • AD Lines: Bullish. The Nasdaq AD Line corrected rather hard in April and broke its March low. The 125-day EMA of Net Advances remains positive though. The NYSE AD Line stalled out since early February, but remains in an uptrend overall. 
  • AD Volume Lines: Bullish. The NYSE AD Volume Line broke its March low, but quickly recovered. The Nasdaq AD Volume Line remains above its March low.
  • Net New Highs: Bullish. Net New Highs flattened on both the Nasdaq and NYSE the last few weeks, but the Cumulative Net New Highs Lines remain above their 10-day EMAs.    
  • Bullish Percent Indices: Bullish. The sector BPIs took a hit the last few weeks, but seven of eight remain above 50%. The Energy Bullish% Index ($BPENER) is below 50%.
  • VIX/VXN: Bullish. The CBOE Volatility Index ($VIX) and the Nasdaq 100 Volatility Index ($VXN) moved higher in early April and then consolidated near resistance from the February highs. Breakouts would signal rising fear and this would be bearish for stocks.  
  • Trend-Structure: Bullish. The major index ETFs hit new highs in March and then corrected in April. IWM, DIA and MDY have possible topping patterns, but the declines in SPY and QQQ look more corrective. Watch support from the March-April lows.
  • SPY Momentum: Neutral. RSI broke below 40 for the first time since November and MACD(5,35,5) dipped into negative territory last week. The Aroon Oscillator also dipped into negative territory, but did not break below -50.
  • Offensive Sector Performance: Bullish. XLI has a potential topping pattern at work since February (head-and-shoulders), but XLK, XLY and XLF have corrective looking patterns for now.
  • Nasdaq Performance: Bullish. The $COMPQ:$NYA ratio hit a 52-week high in early April and remains a leader overall.  
  • Small-cap Performance: Bearish. The $RUT:$OEX ratio peaked in early February and broke below its November low in April. Relative weakness in small-caps is a concern overall.
  • Breadth Charts (here) and Inter-market charts (here) have been updated.

This table is designed to offer an objective look at current market conditions. It does not aim to pick tops or bottoms. Instead, it seeks to identify noticeable shifts in buying and selling pressure. With 10 indicator groups, the medium-term evidence is unlikely to change drastically overnight.


Previous turns include:

Positive on 30-December-11
Negative on 16-December-11
Positive on 3-December-11
Negative on 23-November-11
Positive on 28-October-11
Negative on 5-August-11
Neutral on 29-Jul-11
Positive on 30-Jun-11
Negative on 17-Jun-11
Positive on 25-Mar-11
Negative on 18-Mar-11
Positive on 3-Sep-10
Negative on 13-Aug-10
Positive on 6-Aug-10
Negative on 24-Jun-10
Positive on 18-Jun-10
Negative on 11-Jun-10
Positive on 5-March-10
Negative on 5-Feb-10
Positive on 11-Sept-09

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at 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. Learn More