General Stock Market Commentary

Friday was a really awful day in the market, particularly for NASDAQ stocks. Just awful. And now there is concern about a follow-through to the downside on Monday.

The market started to roll over on Thursday, but I'm not sure too many people anticipated high volume selling on Friday. 

The NYSE Index doesn't look too bad yet. The selling was definitely much worse on the NASDAQ, particularly among technology stocks.

The PMO Index rolled over.

The major indexes closed well below their 5-day averages.

The bullish percents confirmed to the downside.

The summation indexes confirmed to the downside. All three of these indexes are showing a series of lower highs and lower lows.

Junk bonds have retreated to the uptrend line. This is quite a solid rally that started in November of last year. So I would expect it to retrace at some point and that doesn't mean that it points to a significant decline for stocks. However, if the price of this ETF declines along with some alarming other technical signals, then I'd take it seriously. At the moment, the uptrend is holding and the price is still above the horizontal support level.

Here is a look at the bear signals that the price of the junk bond ETF has generated in the past. It doesn't provide much advance warning of a stock sell-off. I'd say it is a confirming indicator when combined with other indicators.

New NYSE 52-week lows were worrisome this past week. There were four days in a row of excessive new lows. Many of the stocks hitting new lows were biotech and that makes me feel a little better about the market, but not much. NASDAQ new 52-week lows rose significantly. This chart is bearish for stocks and I think it is saying to get cautious. I'd rather miss out on a rally than to stay heavily invested while this chart shows elevated numbers of new 52-week lows. Bearish.

This chart combines several indicators. It shows how the number of new lows picks up while the PMO is at the lows of its range but then recedes as the PMO moves upwards. However, this past week shows the number of new lows increasing while the PMO is at the top of the range, and that is bearish for the general market. Maybe it hasn't resulted in a significant market decline every time it has occurred, but for me it is a signal to step aside from the market until conditions return to normal. I'm a seller.

The technology ETF continues to look okay, but the semiconductor ETF looks like it has entered into a downtrend below its 200-day average. I think the semiconductor stocks are too important to the direction of the general market to be ignored. Bearish.
 

The chart above shows daily prices, and the chart below shows the same two ETFs using weekly prices. The semiconductors are still holding the uptrend, just barely, but the chart has the look of a bearish head-and-shoulders price pattern that is about to break down.

Bottom Line: I had a decent amount of cash in my accounts as the market opened on Friday, but my accounts still took a bad hit. I'm ready to raise even more cash on Monday. I'll sell the weakest stocks first.

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Here is my favorite longer-term indicator. Unfortunately, the market conditions have weakened quickly so this indicator isn't helping at the moment. However, if the selling is going to turn into a significant market decline, then this indicator will start to point lower in a few weeks.

Outlook Summary

The short-term trend is DOWN for stock prices as of Nov-15

The ECRI Weekly Leading Index points to ECONOMIC RECOVERY as of July 2023

The medium-term trend is UP for Treasury bond prices as of Feb-01. (yields down, prices up)

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