Lots of weakness in the market
This hasn't been a week that gives you confidence in your decision making capabilities. The week was weak sums it up. A lot of readers are happy the the last trading session on Friday was up but let's look at where we really ended. I'm going to use Barchart to get all my data and just look at the numbers not the headlines for my guidance. I use 3 similar yard sticks because each measures the market in a different way.
Value Line Index -- Contains 1700 stocks so its much broader than the S&P 500 or very narrow Dow 30 -- I think it's much more representative of the real market action -- Down but not out
1 - Down 3.57% for the week but still up .39% for the last 20 sessions
2 - 64% Barchart technical sell signal
3 - Trading below it's 20, 50 & 100 day moving average
Barchart Market Momentum -- contains 6000 stocks -- Percentage of stocks closing above their Daily Moving Averages for various time frames -- Above 50% is good -- Short term upward bias
1 - 20 DMA -- 54% closed above on Friday -- 76.55% closed above last week -- only 30.04% above last month
2 - 50 DMA -- only 36.00% closed above last Friday -- only 40.88 closed above last week - only 27.14% closed above last month
3 - 100 DMA -- only 41.98% closed above last Friday -- 51.47% closed above last week -- only 46.33% closed above last month
Ratio of stocks hitting new highs/new lows for various time frames -- 1.0+ bullish, 1.0 neutral, below .99 bearish -- We have all 3 time periods bearish
1 month ratio new highs/new lows -- 664/775 = .86
3 month ratio new highs/new lows -- 243/519 = .47
6 month ratio new highs/new lows -- 206/337 = .61
Summary and investment strategy -- Although the market ended on an upbeat note on Friday don't get suckered into thinking we are in a market recovery until you see better confirmation of an upward trend. My major indicator is the Barchart Market Momentum. I look to see if 50% of their stocks closed above their Daily Moving Average. 50% above the 20DMA -- On your mark. 50% above the 50 DMA -- Get set. 50% above all 3 -- GO!. I'm waiting and watching for that.
Jim Van Meerten is an investor who writes on investing here and on Barchart Portfolio Blogs. Please leave a comment below or email JimVanMeerten@gmail.com.
Disclosure: No positions in the stock mentioned at the time of publication