Things That Make You Go Hmmmm

I’ve got a lot on my plate and on my mind this morning but I wanted to put up these charts and give an idea of what I’m looking at since I didn’t post anything yesterday.

It’s times like these where having an investment plan is extremely important, emotion can destroy an investment account and keep you up at night. This current market environment has been making me go back and forward in developing an opinion. On one hand the charts just look ugly but on the other I must respect what the price action is telling me and not try to fight Mr. Market.

First up is a chart of the S&P 500 with the %B indicator which shows us where price is relative to its upper and lower Bollinger Bands. I’m using here the 65-day Moving Average with the bands set at 2.5 standard deviations above and below the MA. As you can see from the two dotted lines, when the %B gets to 0.94, we’ve seen some weakness in the market since 2010. We are currently at 0.93, but this is not an exact science as you know.

Next up is the buying and selling pressure of the S&P 500 which I’ve looked at a few times (like here for example). The green line represents buying volume, which has been falling while the S&P has made higher highs.

Next we have the Dow Industrial Average and the Dow Transports. Typically these two move together, but currently transports have broken away from the Dow in creating new highs. This is something Dow Theorist look at for buy and sell signals, but I won’t get into all that criteria today.

I thought I’d end on a positive note, I had been noticing that the cyclical index had been diverging from the S&P 500, but recently it has popped up, confirming the price action and cancelling out the divergence. Small caps (not shown) also had a positive day yesterday, breaking above IWM’s falling trendline.

Technical analysis is not an exact science. The participants in the market are always changing and the technology is always evolving. There will never be a single chart that acts as the holy grail.  I’m worried about equities at this point but like I said, we must respect the price action in front of us.

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+.