Tuesday, February 4, 2014

NYA NYSE Composite Index Loses the 40-Week MA Signaling a Cyclical Bear Market Ahead

Keystone's NYA 40-Week MA Cyclical Market Signal indicates that equities have fallen into a Cyclical Bear Market. Will this remain since the failure is only by 9 points? Time will tell.

For the cyclical time period, weeks and months, markets are bullish and in a cyclical bull market when the NYA is above the 40-week MA. Markets are in a cyclical bear when the NYA is below the 40-week MA. Note the long cyclical bull trend for the last year and one-half. The September-October 2012 selloff teased the 40-week MA, as well as the June 2013 market bottom, but the bulls held the line and the bears folded like a cheap suit, unable to create a sustainable downside failure.

The red lines show the rising wedge, overbot conditions and negative divergence that created the market top and smack down as forecasted here as the year ended. At the same time, 95% of the analysts and traders were telling people to invest in stocks. The spank down occurs as expected and the collapses out of rising wedges can be quite dramatic. Aunt Edna took her entire life savings and placed it in dividend, biotech, high-yield and small cap stocks at SPX 1850 just like the nice gentlemen said to do on television as the eggnog was flowing like water. Now she has lost -10% of her money and huddled around the wood stove for warmth, using junk mail to provide heat while eyeing the cat food.

The jury remains out but the bears struck a blow yesterday stabbing under the 40-week MA to create serious market bleeding. Will the bulls sew up the wound and mount a comeback relief rally, or, will the bears slash further wounds and create more bleeding if the NYA stays under the 40-week MA maintaining the new cyclical bear? Simply monitor this chart moving forward for the answer. Bulls must send the NYA back above 9750, otherwise, the beatings will continue indefinitely into the future. Many traders are lulled into complacency and drunk on the Fed and BOJ wine so a shift into a bear market pattern may be quite surprising for many. 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.

Note Added 11:03 AM:  The bulls send the NYA back above the 40-week MA at 9751.45 maintaining the Cyclical Bull Market. The NYA is now printing 9784.34 about 30 points above the danger line. The attempt by the bears to push price under the 40-week and create a cyclical bear market yesterday fails. Bulls are staging a come back relief rally.

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