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Mixed Messages

The market is exhibiting behavior that we often see during times of indecision. Price is swinging in a large range and at the same time intermediate and long term indicators are giving mixed messages. Take a look at how compressed the the Y axis is on a point and figure chart for the S&P 500 Index (SPX). This clearly shows the sideways range of the past two years along with with multiple changes in the short to intermediate term trend (over the past year). The current trend is up and will stay that way as long as SPX stays above 2020… which coincidentally is about where the 200 day moving average is.

160429spxPnF

The next set of mixed messages comes from a weekly chart of SPX. Weekly RSI is trying to turn down near normal bear market peak levels, while at the same time MACD is moving above levels associated with bear markets.

160429spxWeekly

Monthly momentum and MACD are mostly exhibiting bear market behavior. MACD is a little stronger than we normally see in a bear market, but as long as it doesn’t turn up sharply it will continue to indicate we’re in a long term down trend.

160429spxMonthly

Dow Theory still points to a long term bear market, but currently has a non-confirmation in place that warns of a possible trend change back to bullish. If the transports (DJTA) can get above 8300 it will confirm the bull market is back.

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My core market health indicator continue to show mixed signals as well.

160429MarketHealth

Conclusion

The market is trading in a large sideways pattern and giving off mixed messages about the long term trend. All we can do at the moment is wait for more information. While we wait, the core portfolios are modestly hedged and the volatility hedged portfolio remains 100% long.

 
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