Trend Insights From The Monthly Charts

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At the end of January 2019, the S&P 500 monthly A/D line closed at a new high, which is a positive sign for the market’s trend.  The monthly A/D line is now stronger than it was at the September 2018 high.

In March 2015 (not shown), the A/D line peaked and didn't make a new high until March 2016 (point 1). This new high demonstrated a positive shift in long-term trend, as the stock market was recovering from an ugly correction.

The monthly A/D line also made a new high in January 2018 before dropping lower, and it was not until May 2018 (line 2) that this high was overcome. This kicked off the four-month rally to the September price peak. As is always the case, the monthly signal was preceded by a bullish breakout on the weekly and daily A/D lines as of May 11, 2018.

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Every day and every week I review the following advance/decline lines: NYSE All Securities, NYSE Stocks Only, S&P 500, Nasdaq 100, Russell 2000 and Dow Industrials. The monthly A/D lines are updated at the end of each month. This process allows me to rate the daily, weekly and monthly trend as positive, negative or neutral. The daily A/D lines turned positive on January 4, and have remained as such, while it was not until January 11 that the weekly A/D lines also turned positive. The monthly analysis been positive since March of 2016.

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On the chart, you will notice that the bullish % bottomed in the December 13 survey, while the bearishness reached it maximum level at the end of December. I would expect investors to be encouraged by last week's earnings in the next survey.

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There were some interesting developments on other monthly charts. The yield on the 10-Year T-Note closed in January at 2.635%, which was the lowest monthly close since December 2017.  The monthly uptrend (line b) was broken in December. The support from the late 2016 and early 2017 highs has now been reached. There is further support in the 2.500% area. The monthly Moving Average Convergence Divergence (MACD) and MACD-Histogram are both negative.

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