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$SPX Intermediate-term Trend Update

Over the past several months I've highlighted one of the most simply, yet effective means to determine the intermediate-to-longer-term trend in the S&P 500, the 43 & 17-week ema pair. The posture of these two exponential moving averages has done an exceptional job of defining the larger trend for many years, capturing the bulk of every bull & bear market with only one relatively brief whipsaw signal in over two decades.

$SPX 43-17 weekly ema trend Nov 9th

$SPX 43-17 weekly ema trend Nov 9th

 

The 17-week ema most recently printed a weekly close below the 43-week ema on the week ending September 11th, signaling a new downtrend in the $SPX since then. However, the 17-week ema is currently trading slightly above the 43-ema by a small margin and as such, how the $SPX trades for the remainder of the week will either keep this trend indicator on an intermediate to longer-term sell signal (bearish) or cross back into bullish territory, thereby making the recent sell signal the second whipsaw signal in over 20 years.

A couple of points worth reiterating: First of all, no single stand-alone buy or sell indicator is 100% effective... not even close. Nor should any one trend indicator be used alone, rather bullish & bearish trend signals should be confirmed or used in conjunction with other buy & sell signals.

This same 43/17-weekly ema pair has also done an excellent job of defining intermediate to longer-term bull & bear trends in the other major diversified US equity indices as well and as stated several times recently, the leading index, the Nasdaq 100, has remained on a solid buy signal using this 43/17 ema pair since July of 2009, without a single bearish crossover. Currently, the Wilshire 5000 ($WLSH), Dow Jones 65 Composite ($DJA), S&P 400 Midcap Index ($MID), & Russell 2000 ($RUT) all remain on sell signals with the 43/17 weekly ema pair. However, until/unless the $NDX follows suit, it is still too early to say with a high degree of confidence that a new bear market is likely underway.

Bottom line: I continue to believe that the markets are at a very critical technical juncture and how the market trade over the next few weeks could determine whether the next major trend in US equities is up or down.

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Nov 10, 2015 9:38am|Categories: Equity Market Analysis|Tags: , |4 Comments

4 Comments

  1. rsotc November 10, 2015 9:51 am at 9:51 am

    I should have added to that post that based on all of the other bearish technical events over the past several months such as primary bull market uptrend line breaks, several deterioration in market breadth, etc…, I still favor the longer-term bearish scenario, even if the $SPX or a couple of these trend indicators briefly flip back to bullish for a few weeks. It would appear to me that it is only a matter of time before the handful of mega-cap, over-weighted stocks in the Nasdaq 100 collapse under their own weight, kicking in the next major leg down in US equities. However, until we see those $NDX leading stocks buckle, it is just to early to very aggressively engage this market on the short side.

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  2. Sky November 10, 2015 10:52 am at 10:52 am

    Thanks Randy,

    I come from the macro perspective – and use US ISM as a marker for recession, and when to go hard short US markets — ISM was 50.1 last month and deteriorating and once we print below 50, that’s a macro trigger to go heavily short. This next downturn looks like it will be assisted by a global recession from many other macro indicators as well.

    I deeply appreciate your work!!!!

    cheers
    Watt

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    • rsotc November 10, 2015 11:17 am at 11:17 am

      A bit early to call it a well-defined trend, as we need at least one more lower trough of highs but so far, it would appear that the ISM peaked in mid-2014 and has been trending lower since, recently flirting with that all-important 50 level:

      View post on imgur.com

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