According to some experts in this game the bullishness of Wall Street's market strategists hit a three-year low this month. This is being viewed as a contrarian buy signal by the Street where most of the money is being made when the bulls are bearish and the bears are bullish.
If this holds true, then expect stocks and pessimism to rise in tandem.
In last week's blog the charts projected a major selloff in the making and so far this bearish configuration hasn't changed any. Check this narrowly based [DOW] chart and broadly based [RSP] chart and note that the Moving-Average lines configurations on both charts remain bearish with the red lines crossing below the greens.
For as long a these configurations stay in place, the market remains vulnerable to a selloff.
The NASDAQ [NDX] appears to be developing a bullish mode. After breaking out from its consolidation stance last week, this index appears to be finding support from the bullish MACD momentum bars and RSI strength indicator.
The technology sector [IGM] has a bullish MA lines configuration with the red line above the green. The RSI strength indicator is still solid in its bullish territory, all of which points to strong market action ahead. But for as long as the MACD momentum bars can't get off the demarcation line, any rally from here is mainly a dead-cat's bounce.
The Mid-Cap sector of the market [MID] gives a good reflection of the market as a whole. It shows how a bullish MA lines configuration was formed when the red line crossed above the green last March, and the market took off.
Then came the consolidation period between July and September. Even though during that time the MA lines configuration remained bullish [red line above the green] the MACD momentum bars faded below the demarcation line. This was a sign that the market was losing its upside momentum and setting up for a nosedive.
But here is the tricky point for the market as the red MA line crosses below the green. For now, it is still too early to assume that this move will stick. But if it does, watch out down below.
The small-caps [SML] show a similar configuration with the same implications as the mid-caps. The exception here is that the MA lines configuration maintains its bullishness with the red line above the green.
This is corroberated by the RSI strength indicator and the MACD momentum bars, both of which are back in bullish territory.
This means that it is still a toss-up if this rally can continue or not.
This [BPS] bull index shows what's really going on in this market. After this steep nosedive in June followed by a strong reflex rally in July the market consolidated right into September when it is facing another caution signal [tricky point] as it did last May.
Then as now, the red MA line slipped below the green which alway gets warning lights flashing for the bulls.
The commodity market [GTX] isn't quite sure if it has hit bottom or not. Note that the red MA line appears to start slipping below the green. If that move continues, expect further downdrafts in this index ahead.
That the weekly red MA line of this [TRAN] index is still above the green [barely] is a sign that the economy is still possitive. But that the MACD momentum bars appear to be unable to rally off the demarcation line, is a sign that upside momentum in the economy is fading.
This market-forecasting junk-bond canary [JNK] had itself a nice snap-back rally a couple of weeks after its steep nosedive in early September. But here is the tricky point.
If this index can rally past its previous high, the market will follow. If it can't, neither can the market.
All through July it were the consumer discretionary [XLY] that kept the market up there. But when the MACD momentum bars turned bearish, so did the MA lines configuration with the red line slipping below the green.
This caused last Friday's rally attempt to stall, and may have put the bears back in control of the market.
The bulls in this game [SPXL] appear to be in a tough environment. First the steep nosedive in July followed by a strong reflex rally into September. But with the MACD momentum bars turning bearish below the demarcation line, the MA lines configuration formed a death-cross when the red line slipped below the green, surely a bearish omen for the bulls.
But for as long as the MA lines configuration stays bearish for the bears [SPXS,red line below the green] in the long-run [whatever that means] the bulls will remain in control of the market.
Makes sense?? No wonder that with all these conflicting signals the market will most likely move sideways for a while,with plenty of ups and downs along the way.
But just in case the market moves your way, check my Home-Page for more ETF and market info; and