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I have marked the monthly MACD buy and sell signals on the chart with green vertical lines for buys and red for sales. The monthly MACD is a powerful but slow moving signal. It has protected its followers from getting killed at the major market tops. It is slow to react to market bottoms, as we just saw at the XMAS even 2018 bottom. Over the past few months, the monthly MACD has whipsawed on the SPX. And you might note, that it wasn%27t confirmed by other indexes, including the NDX , VTI and ACWI. (Nasdaq 100, Total Market Index and All World Index) Now it is and it looks very bullish to me, both short and long-term.
I added this chart to track the 12 month rate of change. The markets have had wild ups and downs, since September 2018, with very little net. That is wearing on the nerves. Now we can see that the downtrend line on 12 month return has been broken to the upside. That further confirms bullishness
This chart contains the weekly action in the $SPX since the 2009 bear market low. Following the 2016 bottom, the market ramped much higher in what was an unsustainable pace, climaxing in 2018.. Since the initial peak in January 2018, the market have traded in a volatile and broadening range. It has traced out what is known in technical parlance as a broadening top. Broadening tops are typically bearish, but I will keep an open mind. There have been a lot of factors at play here. We have a Fed that until December 2018, was looking to raise rates. Then they reversed course. The US/China have been engaged in a lengthy tit for tat trade war. That looks to be improving now. So, it looks as though we are breaking out the top of this broadening pattern and I will give the markets the benefit of the doubt here BUT I will keep in mind the unstable nature of the trading in the very recent past. In other words, I will hold this recently change of opinion to bullish with a loose grip. After all, it%27s our security we are playing with. You have to be willing to change your mind.
This is a commonly used Vanguard ETF that mimics the entire market. It provides greater diversification than the SPY that mimics 500 large cap stocks.. Accordingly, I prefer it to judge the overall markets. It has only existed 20 or so years, so its chart is not as long as the SPX presented above. Similarly I%27ve marked the MACD buy and sells with green and red vertical dotted lines.....It appeared that it was about to experience a monthly MACD buy signal at the end of July, but it didn%27t. Instead the SPY weakened by end of August and joined the other indices on sell signals. It did turn positive in September and confirms the MACD buy signal on the SPX which is very bullish
I%27ve marked the monthly MACD buy and sell signals here for the Nasdaq 100. Traders should use the etf QQQ, which mimics the NDX 100 for trading purposes. This etf has a heavy weighting (39.9%) in the FAANG stocks. Facebook, Apple, Amazon, Netflix and Google. The NDX looked about to produce a monthly MACD buy 7/31 but instead remained on a sell. Of late, we%27ve seen the market rotate toward value stocks and there has been very hard selling in the software stocks that had gotten very, very richly valued. That is healthy, and it is possible focusing on value could save this market. After whipsawing like the rest of the market, the NDX went on an MACD buy signal at the end of September and remained so in October. Again confirming the SPX MACD signal
IWM is a small cap index, the Russell 2000. It has lagged the performance of the larger stocks and will not be on a MACD buy signal at 7/31. I include its chart because I am looking for confirmation between markets. Small cap strength often leads markets off bottoms. Small caps never got close to a MACD buy.
This is the All World Index. It was close to giving a monthly MACD buy signal at 7/31 but has since weakened again. Lots of pressure points around the world, from BREXIT to the trade war involving the US and China.
This is All World Ex-US. It shows that the world, ex US isn%27t very strong. All the measures we took to lower taxes and increase spending, strengthened our economy in the near-term. Time will tell what that does over the long-haul. Never been done before at a cycle peak.
Sentiment data is updated on Thursdays. Bullish signals occurs if the green bars fall below 35 (green line in upper section) or if the red bars exceed -50 (green line in lower section).
Bearish signals occurs if the green bars exceed 55 (red line in upper section) or if the red bars don't cross -20 (red line in the lower section)
Pension Partners provided some additional color via a tweet. They peg the extreme bearish survey posture at 26% bulls, which has occurred only 10% of the time since the survey began in 1987.
The bullish extreme, in their study is when the bullishness exceeds 52%. When I made this particular note the survey had been under 26%, like at 17% which portended very good forward returns. (date of this update 6/5/16. I believe the bullish survey number had been as low as 17%.
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