Although Dow Theory hasn’t confirmed a bear market yet, a lot of other S&P 500 Index (SPX) indicators are starting to show bear market behavior. I’ve mentioned before that monthly MACD and Momentum are starting to look like we’re in a bear market. In addition, the long term timing indicator at Trade Followers (breadth between bullish and bearish stocks) is signalling that we’re in a long term down trend.
Now it appears that weekly MACD and RSI for SPX are starting to show strong signs that we’re in a bear market. Notice on the chart below that during bear markets RSI spends most if its time below 50 with peaks in the 55 to 60 area. That has been the case for RSI since the May peak. MACD is also showing the same type of weak behavior. During short term rallies in long term down trends MACD is usually constrained by the zero line. The last rally barely moved MACD above zero and it is now well below that level. So this chart has two more signs that the bull market is likely over and bear market rules should apply to your trading and portfolio management.