3 charts that have me worried
Just a few quick observations and charts to share
today. I will expand on my analysis Wednesday when I give my normal month-end
overview.
The Nasdaq is now lagging the NYSE based on my weekly indicator. Historically,
the market has struggled to make gains when the Nasdaq is not leading.
As strong and broad as the move was last Tuesday, it produced very few stocks
that broke out from basing patterns. Of those that did break out, very few have
stuck.
Tuesday’s breadth statistics were excellent (and perhaps too good…see
last Wednesday’s column), but they’ve done little to change the trend of a
narrowing market advance. Below are some charts that I’ve shared before…
% of Stocks Trading Above Their 40-Day MA — Notice this continues to
trend down even while the market has trended up.
% Of Stocks At Least 1 Std Deviation Below Their 40-Day MA — Notice the
number of stocks in strong downtrends has been on the rise. Tuesday’s strong
move up lowered the number, but it may have been just an oversold bounce among
many issues…
NYSE Advance Decline Line — This was the one breadth measure that had
been acting well this year. But even with the strong rally last week, we failed
to get a new high here…
I feel like a broken record, but I continue to worry about breadth. The market
keeps looking weaker and weaker. From a risk management perspective, last week’s
rally was definitely a positive, since it allowed me to move up stops in several
intermediate-term positions. Diligently trailing your stops in a weakening
market is imperative. I’d suggest continued caution on both sides of the market.
Best of luck with your trading,
Rob
For those who may be looking to expand their
knowledge beyond just market timing, my
Hanna ETF Money Flow System utilizes the VIX in generating trading
signals for spread trades.
Rob Hanna is the principal of a money
management firm located in Massachusetts. He has spent the last several years
developing and refining methods for trading in stocks across multiple time
frames. He selects stocks using both fundamental and technical criteria, and
then trades them using technical analysis techniques.