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Absence Of Bulls

|Includes: SPDR Dow Jones Industrial Average ETF (DIA), IWM, QQQ, SPY

A week ago we stated:

  • "Overall next week Breadth sentiment suggests more of bearish trading."

The major market indexes are down for the week.As of now we have following long-term Breadth sentiment:

  • 32% of the S&P 500 (SPY) index listed stocks are bullish - down by 3% from a week ago - Bearish Breadth;
  • 43% of the DJI (DIA) index listed stocks are bullish - down by 7% - Bearish Breadth;
  • 35% of the NASDAQ 100 (QQQ) index listed stocks are bullish - down by 1% - Bearish Breadth;
  • 21% of the Russell 2000 (IWM) index listed stocks are bullish - down by 3% - Bearish Breadth;
  • 19% of the NYSE index listed stocks are bullish - down by 4% - Strong Bearish Breadth.source: Advance Decline Indicators

The long-term data are down. We have more of bearish sentiment all across the market.

There is a number of Large Cap stocks mainly listed in the Dow Jones Industrial index which are not in defined bearish trend. However, the Small Cap market sector is in long-term bearish trend. Russell 20000 index broke below its long-term support and 79% of the Russell 2000 stocks are traded closer to their 52-week lows. Similar could be said about the NYSE Composite index: the support is broken and 81% of the NYSE stocks are in the long-term bearish trend. The long-term market trend is bearish.

Breadth data confirm it, Small Cap market sector confirms it, volatility confirms it. The DJI is the only index from the main market indexes where the bearish trend is not firmly defined yet.

NYSE Breadth chart

On the shorter-term time-frames, we see the Bears increasing their presence in both Large Cap (S&P 500) and Small Cap (Russell 2000) sectors:

  • 29% of the S&P 500 stocks are above their 200-day MA - down by 8% from a week ago - Bearish Breadth,
  • 23% of the S&P 500 stocks are above their 120-day MA - down by 3% -a week ago Bearish Breadth,
  • 21% of the S&P 500 stocks are above their 50-day MA - down by 4% a week ago - Bearish Breadth.
  • 20% of the Russell 2000 stocks are above their 200-day MA - down by 9% a week ago - Bearish Breadth,
  • 15% of the Russell 2000 stocks are above their 120-day MA - down by 5% a week ago - Strong Bearish Breadth,
  • 18% of the Russell 2000 stocks are above their 50-day MA - down by 8% a week ago - Strong Bearish Breadth.

The short-term time-frames are yelling to the Bears. The past week started on a positive note, yet, by the end of the week the Bears took over and erased all gains by pushing the main market indexes into red for the week.

As of now, we have negative Breadth all across the market and it is witnessed on all shorter-term time-frames. In addition, we have negative momentum - we recorded an increase in the number of the bearish stocks by the end of the week. Also, we have rising volatility which is a bearish sign.

The worth signal is relatively flat volume during this week's decline. As a rule, we supposed to see an increase in volume during a decline. Increase in volume and volume surge during a price drop reveals that the Bulls are entering and buying from the Bears. A fight between Bulls and Bears (between buying demand and selling supply)generates a volume surge. The absence of volume surge, reveals absence of the Bulls willing to fight the Bears for the dominance.

Next week outlook is bearish. Most likely we will see further decline. The market indexes will dive dipper until they run into a strong volume surge - sign of the wave of the Bulls coming in and buying low priced (by their opinion) stocks. If this bullish wave (volume surge) is strong enough, only then, we may expect a reversal up.

Russell 2000 Percent above 50-day MA

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.