May Brings A New Short-Term Downtrend

I can't believe it's May already. I think we have a new short-term downtrend as of Friday, although I wouldn't be surprised to see more choppy, sideways market behavior. This has been a really tough market to follow. 

You can see the change in the character of the market in the PMO chart below. Starting in mid-March, the PMO index has been unable to reach the top and bottom of its range, and starting in mid-April a couple of sharp changes in direction have not shown any follow-through. It could be a consolidation of gains before the next major leg upwards, but (with a reminder that I am a market-pessimist) it could also be a larger topping process.

The first step in determining if there is a new short-term downtrend is to see the SPX trading below its five-day moving average. This chart shows the SPX below the five-day, but just barely, and it isn't very convincing.

The weakness in the Call/Put index is more convincing. In addition to a big red bar on Friday, there is a pattern of lower highs and lower lows, and it feels as though the index is getting ready to break down to a new low again. 

The SPX summation index has not rolled over yet (chart not shown), but the NDX summation index certainly has the look of an index headed lower after a nice rally.

The bullish percents ticked lower on Friday, but also not convincingly so. There isn't too much to read into this chart, except that it isn't yet confirming my call that a new downtrend has started.

The SPX bullish percent is at an overbought level, and at a minimum it is a technical signal to postpone major purchases from among these stocks. The Nasdaq bullish percent shows that only 60% or so of these stocks are participating, but I think that is its more natural level if you look at previous years.

The number of new 52-week lows has crept up just a bit again on the Nasdaq. Anytime it is above the 50-level it gets my attention, and it isn't good to see it elevated with the PMO near the top of its range. 

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Disclaimer: I am not a registered investment adviser. My comments reflect my view of the market, and what I am doing with my accounts. The analysis is not a recommendation to buy, sell, ...

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