In today’s article and video we discuss the weakness that pervades nearly all index charts. Over the past few days many of the indexes have lost their PMO BUY Signals. Nearly all have crossed beneath their signal lines with the exception of the Nasdaq which is still holding above its signal line.
The SPY below shows the PMO Crossover SELL Signal but we also see participation of stocks above their key moving averages are trending lower. The Silver Cross Index is below its signal line giving us a BEARISH IT Bias.
The Nasdaq is the only index that still has the PMO holding above its signal line. This is due to the current rally, but that could fail based on the shooting star candlestick being formed on Friday morning. This could fail given we are seeing a bleed off from participation indicators. Admittedly, the Silver Cross Index looks bullish right now but given lower percentages of stocks above their 20/50-day EMAs, it should turn down shortly.
Let’s look at the mega-cap heavy indexes. All of these show the same PMO Crossover SELL Signals and bleeding participation. Most of the Silver Cross Indexes are in decline with some beneath the signal line.
Dow:
Nasdaq 100:
SP100:
Smaller-caps are being hit the hardest right now. They aren’t seeing upside reversals on Friday as some of the larger-cap indexes. If there is a place to hedge, small- and mid-cap indexes seem the best place given their weakness hasn’t subsided. The Silver Cross Indexes are all in decline and beneath their signal lines so all of the small- and mid-cap indexes and broader NYSE.
NYSE:
SP400:
SP600:
Conclusion: While many large-cap indexes are trying to reverse on Friday, internals are very weak especially given the PMO SELL Signals. While we could still see an upside reversal, momentum suggests it will take some time to reignite. In the meantime, participation needs to start seeing improvement rather than bleeding off as it is on all of the indexes. Small- and mid-caps are showing significant weakness and could be an opportunity to hedge your buy and hold positions. Below is a five minute video that details more of the weakness we see in these indexes.
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Erin Swenlin is a co-founder of the DecisionPoint.com website along with her father, Carl Swenlin. She launched the DecisionPoint daily blog in 2009 alongside Carl and now serves as a consulting technical analyst and blog contributor at StockCharts.com. Erin is an active Member of the CMT Association. She holds a Master’s degree in Information Resource Management from the Air Force Institute of Technology as well as a Bachelor’s degree in Mathematics from the University of Southern California.
