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Long Term Trend Battle

Published on July 15, 2015 by in Market Comments

I’m seeing several indications of weakness in the long term trend, but at the same time I’m seeing a lot of indicators that continue to show strength. It appears as if the battle for the long term trend has started. The first sign of weakness comes from monthly MACD for the S&P 500 Index (SPX). It has been rolling over since late last year and finally had a bearish cross in April. Momentum for SPX has been falling, but it is still at healthy levels. So here we’ve got two measures of momentum where one is bearish and the other is bullish.

150715spxMonthly

The next conflict comes from a point and figure chart for SPX. It recently broke its uptrend line that was put in place in late 2012. This created a new down trend and is considered bearish. Price has since recovered and is now only a few points away from breaking the down trend. If SPX can get above 2020 a new uptrend line will start and turn SPX point and figure bullish.

150715spxpnf

Looking at individual charts from a point and figure perspective shows that over 40% of the stocks in SPX have broken charts (bearish point and figure trends). As I’ve mentioned before when this condition is in place and we get a market risk signal the odds of a large decline increase. This leaves us in a tentative position where we hope no risk event occurs. A move back above 60% would be bullish.

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With all of the conflict between indicators you can see that a battle for the longer term trend is underway. Keep an eye out for bullish indicators that get toppled or bearish ones righted as they’ll point the long term direction.

 
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