Tuesday, December 10, 2013

SPXA150 Stocks Above 150-Day MA Daily Chart Negatively Diverging Against SPX

It is always comical to see the traders, who scoff at technical analysis, to turn into technicians at tricky market inflection points, like now. Many are touting how the market internals look great thereby prohibiting any possibility of market downside. What are they smoking? The chart above shows the number of S&P stocks above the 150-day MA for the S&P 500. Note that the gusto in equities peaked back in May over one-half year ago. It is amazing to see markets continue higher weeks and months later. As Keynes said, "the markets can remain irrational longer than you can remain solvent." In fact several hedge funds have blown up due to their short exposure this year.

The red line shows the ongoing series of lower lows for SPXA150 since the May market top. Note how the wine is flowing like water early in the year, higher stock prices occur as more and more stocks print above their 150-day MA's; it was all blue skies and rainbows, until May. The stock market continues to print new all-time highs but the SPXA150 is clearly negatively diverging for the last 7 months. The move up in the stock market is due to the Fed and BOJ liquidity and not due to underlying market strength. The chart above is very bearish for the stock market moving forward. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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