After falling 8.5% from the July all-time highs, the S&P 500 index rebounded but was unable to break to new all-time highs. Two indicators spell trouble for the stock market.
The price action since July 17 of this year, when the S&P 500 made an all-time high, has been interesting. First, on a daily closing basis, the index fell 8.5% by August 5, but then gained 7% in 19 trading days. A 4.5% correction followed, and the price action shows signs of gaining momentum again, with the distance from all-time highs reduced to 3%.
Although the action has been dynamic so far, it has remained within “normal bounds.” Price action derivatives, also known as technical indicators, do not look as promising as the price action itself. Two indicators spell trouble for the stock market. However, we should always keep in mind that derivatives of price action are neither necessary nor sufficient signals for the future. They may also suffer from small samples. Nevertheless, these derivatives may at times provide a signal useful for risk management purposes. The two charts are below.
|
This post is for paid subscribers
Already a subscriber? Sign in |
Premium Content
By subscribing, you have immediate access to hundreds of articles. Premium Articles subscribers have immediate access to more than two hundred articles, and All in One subscribers have access to all premium articles, books, premium insights, and market signal content.
Specific disclaimer: This article includes charts that may reference price levels. If market conditions change the price levels or any analysis based on them, we may not update the charts. All charts in this article are for informational purposes only. See the disclaimer for more information.
Disclaimer: The articles are provided for informational purposes only and do not constitute investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purposes of the articles. Under no circumstances should the articles be treated as financial advice. The author of this website is not a registered financial adviser. Before subscribing, please read our Disclaimer and Terms and Conditions.
Charting and backtesting program: Amibroker. Data provider: Norgate Data
If you found this article interesting, you may follow this blog via RSS, email, or Twitter.
