Reviewing The Charts For Week Thru April 29

A short-term downtrend began on Tuesday, April 25, but it is hard to believe in the signal considering the market strength towards the end of the week.

The market closed on Friday at the session highs showing impressive strength, and the closing prices of all three major indexes look to be above the April highs. If the market rallies even higher then I'd have to say that there was a bad signal on Tuesday... which happens occasionally.

The bullish percents are still below their moving averages and haven't rallied, so it means that the strength of the indexes came from the stocks that were already on bull signals. If the market is going to continue to rally it will need to pull up the weaker stocks which means we will need to see the bullish percents start to point higher again. Before reversing Tuesday's declaration of a downtrend, I'm thinking that these bullish percents need to close above their 5-day averages.

Here is a chart created by John Murphy at Stockcharts.com. It shows that the market has moved higher but with weak participation from stocks. In other words, by showing this chart he is pointing out that the general market has limited upside as long as a majority of stocks are not participating in the rally.

The common stock-only summation index turned down on Tuesday providing a very nice short-term bear signal, but on Friday there was a black candle indicating that the downtrend is in question. 

This chart is showing that the junk bond ETF barely moved this past week which means it didn't confirm the downtrend early in the week, and it didn't confirm the rally toward the end of the week. This chart shows a slight upward bias to the market but not enough to make me a buyer of stocks. 

The chart of the 52-week new lows was very bearish on Tuesday and Wednesday with elevated levels showing on both exchanges which I would consider to be very negative regarding stock prices. The NYSE new lows have since settled down to harmless levels but the Nasdaq new lows remain elevated which indicates a problem behind the scenes in the market. My thinking is that it is okay to trade this market as long as you are ready, and quick, to sell stocks when the sell signal comes because the elevated level of new lows indicates heightened risk, and, simply stated, it is important to respect risk.

I am still a stock market bear, but I have to concede that this is a bullish-looking chart at the moment. The downtrend has been broken and prices closed at the week's high above an important level.

I haven't contributed much in this post to help anyone trying to navigate the current stock market.  Basically, I have stated that a downtrend started on Tuesday but it may have been a bad signal considering the market's strength Thursday and Friday. Not helpful! The only thing mentioned that is of much value is the statement that we need to respect risk.

Bottom Line: I am a stock market bear at the moment. I have a small position in stocks, a larger position in stock inverse ETFs, and I am long treasury bonds via an ETF.


Outlook Summary

The short-term trend is down for stock prices as of Apr-25

The economy is at risk of recession as of Mar-2022

The medium-term trend is NOT SURE for Treasury bond prices as of Feb-4.

 

Strategy 

  • Deploy cash by adding to stocks while the market is near its short-term cycle lows.
  • Raise cash by partial sales of stocks while the market is near its short-term cycle highs.

 

Trader Discipline

  • Corrections are opportunities
  • Never invest based on personal politics
  • Stick to the trading plan and don't give in to fear, greed, or anger

 


More By This Author:

The Not-So-Strong Short-Term Uptrend Continues
The Market Won't Be Rushed Into The Next Short-Term Downtrend
Finally A New Short-Term Uptrend

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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